Exam 47: Professional Liability and Accountability

An accountant is required to discover every impropriety, defalcation, and fraud in a client's books.​

Under rules of professional conduct, state authorities can discipline professionals for misconduct.​

Lauren is an attorney. Like the conduct of all attorneys, Lauren's conduct is governed by rules of professional conduct established by the state in which she is licensed, and the Model Rules of Professional Conduct of​

In an opinion, an auditor can include a general statement disclaiming any liability for false or misleading financial statements.​

Attorneys are required to find relevant law that is applicable to a case and can be discovered through a reasonable amount of research.​

An accountant is liable for an omission in a registration statement to a purchaser of securities whether or not the omission has a causal connection to the purchaser's loss.​

The competency of professionals' service is never an issue.​

Everett is an accountant whose clients include Finance & Capital, Inc. Under the Ultramares rule, if Everett is negligent in his work for Finance & Capital, he could be liable to Finance & Capital and​

Reed prepares federal corporate income tax returns for Shopping Malls, Inc., and other firms. Under the Internal Revenue Code, with respect to an understatement of a client's tax liability, Reed may be liable for​

Damages payable to a client on a professional's breach of contract do not include any penalties the client had to pay as a result of the breach.​

Root & Branch is a Registered Public Accounting Firm. Root & Branch performs auditing services for Sales & Service Company. Under the Sarbanes-Oxley Act, at the same time, for the same company, Root & Branch can also perform​

Reliant Funds, Inc., files a suit against Saul, an accountant, under the antifraud provisions of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission. To succeed, Reliant Funds must show that Saul​

Silvia prepares federal corporate income tax returns for Trade & Pawn Stores, Inc., and other firms. Under the Internal Revenue Code, with respect to an understatement of a client's tax liability, Silvia may be liable for​

Hadley, an accountant, accumulates working papers while performing an audit for Ilene. After the audit, these documents belong to​

An accountant is not liable for a false statement that affects the price of a security if the buyer or seller of the security knew the statement was false.​

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

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 who performs an audit may be liable for failing to detect misconduct if a normal audit would have revealed it.​

Under the Sarbanes-Oxley Act, working papers are the property of the client for whom an accountant performed a service.​

Accountants and other professionals face liability under the common law for any breach of contract.​