Exam 47: Professional Liability and Accountability

To obtain damages for fraud, an innocent party does not need to have been injured.​

Rollo is an accountant whose clients include Systems Analysis Corporation. Tyra is Rollo's attorney. Under the common law and by statute in many states, working papers that Rollo develops when preparing financial reports for Systems Analysis are owned by​

Diderot's accountant is Esteban and his attorney is Figaro. All states protect, as privileged information, Diderot's communications with​

Geoff is an attorney, whose clients include Hydroponic Superstores, Inc. Unless Hydroponic has violated securities law, the contents of Geoff's file on Hydroponic may be disclosed to someone other than the firm​

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

Ezra, an accountant, intentionally misstates a material fact to mislead Fruit Packing, Inc., a client. Fruit Packing justifiably relies on the misstatement to its detriment. Ezra is most likely liable for​

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

A professional can be liable for constructive fraud only if he or she acted with fraudulent intent.​

Digital Systems Corporation files a suit against Ethan, its former accountant, alleging constructive fraud. Digital Systems need not prove​

An accountant is liable for a misleading statement that affects the price of a security, unless the accountant acted in good faith.​

Randi, an accountant, includes a false statement in a report for Social Media Marketing, Inc., that is filed with the Securities and Exchange Commission. When Theo buys stock in Social Media and loses money on the investment, he files a suit against Randi, alleging fraud under the 1934 Securities Exchange Act. To avoid liability, Randi can show that she​

Odell, an accountant, prepares for Pronto Tacos Corporation a financial statement that omits a material fact. The financial statement is included in Pronto Tacos's registration statement, which Qiana reads. Qiana buys Pronto Tacos stock. Under Section 11 of the Securities Act of 1933, for Odell to be liable for the omission, Qiana must show that she​

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

Odette, an accountant, contracts to perform services for Percy. Odette acts in good faith and conforms to generally accepted accounting principles, but makes an incorrect judgment. Odette is most likely​

In all cases involving allegations of negligence, the plaintiff must prove that the professional's breach of the duty of care actually caused some injury.​

Professionals are required to adhere to certain standards of performance within their profession.​

Ricardo, an accountant, contracts to conduct an audit for Sensei Sushi Restaurants. In performing the audit, Ricardo fails to detect certain misconduct. Ricardo is most likely​

Tyson accuses Ulman, an attorney, of committing malpractice. Malpractice is​

Fact Pattern 47-1​ Nelson, an accountant, enters into a contract to provide services to Operational Processes, Inc. (OPI). Nelson does not finish the work within the contract's deadline. This causes OPI to fail to meet certain other deadlines owed to Prime Bank, which results in the firm's payment of penalties to the bank. -Refer to Fact Pattern 47-1. OPI may be entitled to​

Brenda is an attorney whose clients include Capital Finance Company. If Brenda is negligent in her work for Capital, under the Restatement (Third) of Torts, Brenda may be liable to Capital and​