Exam 40: Liability of Accountants and Other Professionals

Regarding a professional, malpractice is

In some states, a party can recover from an accountant for negligence only outside an accountant-client relationship.

An auditor who accepts a client's explanation regarding financial irregularities, despite contradictory evidence, could be considered grossly negligent.

Because of the potential for significant losses to sellers and buyers, under both of the federal securities acts, liability is imposed on accountants for all acts of negligence, including "mere" negligence.

Frye, an accountant, intentionally misstates a material fact to mislead Global Industries Inc., a client. Global justifiably relies on the misstatement to its detriment. Frye is most likely liable for

Finola, a certified public accountant, provides accounting services to Global Trade Corporation. The services include preparing Global Trade's financial reports and issuing opinion letters based on the reports. In 2014, Global Trade falls into serious financial trouble, but neither Finola's reports nor her opinion letters indicate this situation. Relying on Finola's portrayal of Global Trade's financial situation, the firm borrows a large sum of money to build a new shipping facility. In lending Global Trade the money, Harbor City Bank relies on Finola's opinion letter. Finola is aware of this reliance. If Finola did not engage in intentional fraud but was negligent, what is her potential liability?

An accountant is liable for any omission in a registration statement to a person who suffers a loss on the securities described in the statement.

Miriam is an accountant. Natalie is an attorney. Which professional is most restricted from disclosing her or his client's communication?

An attorney who becomes aware that a client has violated securities laws must report the violation to the Securities Exchange Commission-which creates a potential conflict with the attorney-client privilege.

In most states, an attorney may be liable for negligence to a non-client who the attorney knows or reasonably should know will rely on the attorney's opinion.

Lou, an attorney, allows a statute of limitations to lapse on a claim by Metal Fabrication Company, a client. Lou

An accountant who conforms to generally accepted auditing standards and acts in good faith will most likely not be liable to a client for incorrect judgment.

In performing professional services, an accountant is subject to the standard of the ordinarily prudent person.

Despite a professional's breach of contract, the non-breaching client cannot obtain, as damages, the cost of penalties for failing to meet deadlines.

Once an attorney-client relationship arises, to encourage frankness, all communications between the parties are privileged.

Commerce Bank files a suit against Drake, its former accountant, alleging constructive fraud. Drake may be held liable

"A reasonably competent general practitioner of ordinary skill, experience, and capacity" is the normal standard of performance expected of

Del, an accountant, prepares for Econo Inc., a financial statement that omits a material fact. The statement is included in Econo's registration statement filed with the Securities and Exchange Commission. Fran, who relies on the statement, and Gib, who does not, each buy Econo stock. Under Section 11 of the Securities Act of 1933, Del may be liable to

An attorney's conduct is governed by rules of professional conduct established by the state in which he or she is licensed, and the Model Rules of Professional Conduct of

The Public Company Accounting Oversight Board oversees the audit of public companies subject to securities laws in order to protect public investors.