Question 1

For a plaintiff to recover damages from an accountant under Section 10(b) of the Securities Exchange Act of 1934, ordinary negligence is not enough.​

Accepted Answer

A) True 
 B)False

Question 2

In most courts, accountants are subject to liability for negligence only to their clients.​

Accepted Answer

A) True 
 B)False

Question 3

Beck is an accountant who prepares her clients' tax returns. Cole is not an accountant, but he also prepares tax returns for clients. Under the Internal Revenue Code, liability for preparing a false return may be imposed on​

Accepted Answer

A)  ​Beck and Cole. 
B)  ​Beck only. 
C)  ​Cole only. 
D)  ​none of the choices. 
A)  ​Beck and Cole. 
B)  ​Beck only. 
C)  ​Cole only. 
D)  ​none of the choices.

Question 4

An accountant's liability under the Securities Act of 1933 does I require privity of contract with the purchaser of a security.​

Accepted Answer

A) True 
 B)False

Question 5

Accountants are exempt from the criminal provisions of federal tax laws.​

Accepted Answer

A) True 
 B)False

Question 6

Ailing Company's liabilities exceed its assets. Ailing hires Brad, an accountant, to certify a balance sheet showing a positive net worth. Credit Bank relies on the balance sheet to make a loan to Ailing. The firm defaults on the loan. Under the Ultramares rule, Brad is most likely not liable because he​

Accepted Answer

A)  ​did not owe a duty of care to any third party. 
B)  ​is not responsible for his client's finances. 
C)  ​finished his work before Ailing's loan and default. 
D)  ​was not in privity with the bank. 
A)  ​did not owe a duty of care to any third party. 
B)  ​is not responsible for his client's finances. 
C)  ​finished his work before Ailing's loan and default. 
D)  ​was not in privity with the bank.

Question 7

Under federal law, communications between an accountant and his or her client are privileged.​

Accepted Answer

A) True 
 B)False

Question 8

Generally, an attorney is not liable to a nonclient unless the attorney has committed fraud or malicious conduct.​

Accepted Answer

A) True 
 B)False

Question 9

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. Nelson is​

Accepted Answer

A)  ​liable for breach of contract. 
B)  ​not liable, because Nelson is a professional. 
C)  ​not liable, because Nelson's failure must have been OPI's fault. 
D)  ​not liable, because the work took longer than foreseen. 
A)  ​liable for breach of contract. 
B)  ​not liable, because Nelson is a professional. 
C)  ​not liable, because Nelson's failure must have been OPI's fault. 
D)  ​not liable, because the work took longer than foreseen.

Question 10

Delaney is an accountant charged with negligence by Estimation & Valuation Services Inc., a client. Delaney may successfully defend against the claim if he can show that​

Accepted Answer

A)  ​scienter was lacking. 
B)  ​he complied with all International Financial Reporting Standards. 
C)  ​the negligence was not the proximate cause of the client's losses. 
D)  ​the negligence was only contributory. 
A)  ​scienter was lacking. 
B)  ​he complied with all International Financial Reporting Standards. 
C)  ​the negligence was not the proximate cause of the client's losses. 
D)  ​the negligence was only contributory.

Question 11

Nguyen Imports, Inc., accuses Ogilvie, an accountant, of committing defalcation. This is​

Accepted Answer

A)  ​embezzlement. 
B)  ​general misconduct. 
C)  ​professional negligence. 
D)  ​misrepresentation of professional expertise. 
A)  ​embezzlement. 
B)  ​general misconduct. 
C)  ​professional negligence. 
D)  ​misrepresentation of professional expertise.

Question 12

Cathy is an accountant with Discount Retail Corporation. Efrem buys Discount Retail stock and loses money on the investment. To recover from Cathy under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove​

Accepted Answer

A)  ​only the purchase and sale of a security. 
B)  ​fraud, reliance, materiality, and lack of knowledge about securities. 
C)  ​fraud, reliance, materiality, and incompetence. 
D)  ​fraud, reliance, materiality, causation, and scienter. 
A)  ​only the purchase and sale of a security. 
B)  ​fraud, reliance, materiality, and lack of knowledge about securities. 
C)  ​fraud, reliance, materiality, and incompetence. 
D)  ​fraud, reliance, materiality, causation, and scienter.

Question 13

Taylor is an accountant whose clients include Universal Metrics Corporation. Vera is Taylor's attorney. Working papers that Taylor develops when preparing financial reports for Universal Metrics are owned by​

Accepted Answer

A)  ​Taylor. 
B)  ​Universal. 
C)  ​Vera. 
D)  ​no one-the papers must be destroyed immediately after use. 
A)  ​Taylor. 
B)  ​Universal. 
C)  ​Vera. 
D)  ​no one-the papers must be destroyed immediately after use.

Question 14

A failure to follow generally accepted accounting principles and generally accepted auditing standards is proof of a lack of due diligence.​

Accepted Answer

A) True 
 B)False

Question 15

Accountants must surrender possession of working papers relating to an audit or review to the party for whom the work was performed.​

Accepted Answer

A) True 
 B)False

Question 16

Working papers are the documents through which a court orders an accountant to audit a public company.​

Accepted Answer

A) True 
 B)False

Question 17

Professionals are governed by the contracts they enter into with their clients.​

Accepted Answer

A) True 
 B)False

Question 18

April is an accountant whose clients include Bistro Restaurants Inc. If April is negligent in her work for Bistro, most courts would hold her liable to Bistro and​

Accepted Answer

A)  ​any third party. 
B)  ​no third party with whom the accountant is not in privity or "near privity." 
C)  ​third parties who are foreseen users of the work. 
D)  ​third parties who are reasonably foreseeable users of the work. 
A)  ​any third party. 
B)  ​no third party with whom the accountant is not in privity or "near privity." 
C)  ​third parties who are foreseen users of the work. 
D)  ​third parties who are reasonably foreseeable users of the work.

Question 19

Negligence cases against professionals often focus on the standard of care exercised by the professional.​

Accepted Answer

A) True 
 B)False

Question 20

Under rules of professional conduct, a lawyer should not engage in conduct involving "dishonesty."​

Accepted Answer

A) True 
 B)False

Exam 47: Professional Liability and Accountability

For a plaintiff to recover damages from an accountant under Section 10(b) of the Securities Exchange Act of 1934, ordinary negligence is not enough.​

In most courts, accountants are subject to liability for negligence only to their clients.​

Beck is an accountant who prepares her clients' tax returns. Cole is not an accountant, but he also prepares tax returns for clients. Under the Internal Revenue Code, liability for preparing a false return may be imposed on​

An accountant's liability under the Securities Act of 1933 does I require privity of contract with the purchaser of a security.​

Accountants are exempt from the criminal provisions of federal tax laws.​

Under federal law, communications between an accountant and his or her client are privileged.​

Generally, an attorney is not liable to a nonclient unless the attorney has committed fraud or malicious conduct.​

Delaney is an accountant charged with negligence by Estimation & Valuation Services Inc., a client. Delaney may successfully defend against the claim if he can show that​

Nguyen Imports, Inc., accuses Ogilvie, an accountant, of committing defalcation. This is​

Cathy is an accountant with Discount Retail Corporation. Efrem buys Discount Retail stock and loses money on the investment. To recover from Cathy under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove​

Taylor is an accountant whose clients include Universal Metrics Corporation. Vera is Taylor's attorney. Working papers that Taylor develops when preparing financial reports for Universal Metrics are owned by​

A failure to follow generally accepted accounting principles and generally accepted auditing standards is proof of a lack of due diligence.​

Accountants must surrender possession of working papers relating to an audit or review to the party for whom the work was performed.​

Working papers are the documents through which a court orders an accountant to audit a public company.​

Professionals are governed by the contracts they enter into with their clients.​

April is an accountant whose clients include Bistro Restaurants Inc. If April is negligent in her work for Bistro, most courts would hold her liable to Bistro and​

Negligence cases against professionals often focus on the standard of care exercised by the professional.​

Under rules of professional conduct, a lawyer should not engage in conduct involving "dishonesty."​

Law and Legal Reasoning

Courts and Alternative Dispute Resolution

Court Procedures

Business and the Constitution

Business Ethics

Tort Law

Strict Liability and Product Liability

Intellectual Property Rights

Internet Law, Social Media, and Privacy

Criminal Law and Cyber Crime

Nature and Terminology

Agreement in Traditional and E-Contracts

Consideration

Capacity and Legality

Mistakes, Fraud, and Voluntary Consent

The Writing Requirement in Our Digital World

Third Party Rights

Performance and Discharge

Breach of Contract and Remedies

The Formation of Sales and Lease Contracts

Title, Risk, and Insurable Interest

Performance and Breach of Sales and Lease Contracts

Warranties

International and Space Law

Negotiable Instruments

Transferability and Holder in Due Course

Liability, Defenses, and Discharge

Banking in the Digital Age

Creditors Rights and Remedies

Secured Transactions

Bankruptcy Law

Agency Formation and Duties

Agency Liability and Termination

Employment, Immigration, and Labor Law

Employment Discrimination

Small Businesses and Franchises

All Forms of Partnerships

Limited Liability Companies and Special Business Forms

Corporate Formation and Financing

Corporate Directors, Officers, and Shareholders

Mergers and Takeovers

Investor Protection, Insider Trading, and Corporate Governance

Administrative Agencies

Consumer Law

Environmental Protection

Antitrust Law

Personal Property and Bailments

Real Property and Landlord-Tenant Law

Insurance

Wills and Trusts

The Legal Environment of Business

Torts and Crimes

Contracts and E-Contracts

Domestic and International Sales and Lease Contracts

Negotiable Instruments

Creditors Rights and Bankruptcy

Agency and Employment

Business Organizations

Government Regulation

Property and Its Protection

Filters

For a plaintiff to recover damages from an accountant under Section 10(b) of the Securities Exchange Act of 1934, ordinary negligence is not enough.

In most courts, accountants are subject to liability for negligence only to their clients.

Beck is an accountant who prepares her clients' tax returns. Cole is not an accountant, but he also prepares tax returns for clients. Under the Internal Revenue Code, liability for preparing a false return may be imposed on

An accountant's liability under the Securities Act of 1933 does I require privity of contract with the purchaser of a security.

Accountants are exempt from the criminal provisions of federal tax laws.

Under federal law, communications between an accountant and his or her client are privileged.

Generally, an attorney is not liable to a nonclient unless the attorney has committed fraud or malicious conduct.

Delaney is an accountant charged with negligence by Estimation & Valuation Services Inc., a client. Delaney may successfully defend against the claim if he can show that

Nguyen Imports, Inc., accuses Ogilvie, an accountant, of committing defalcation. This is

Cathy is an accountant with Discount Retail Corporation. Efrem buys Discount Retail stock and loses money on the investment. To recover from Cathy under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove

Taylor is an accountant whose clients include Universal Metrics Corporation. Vera is Taylor's attorney. Working papers that Taylor develops when preparing financial reports for Universal Metrics are owned by

A failure to follow generally accepted accounting principles and generally accepted auditing standards is proof of a lack of due diligence.

Accountants must surrender possession of working papers relating to an audit or review to the party for whom the work was performed.

Working papers are the documents through which a court orders an accountant to audit a public company.

Professionals are governed by the contracts they enter into with their clients.

April is an accountant whose clients include Bistro Restaurants Inc. If April is negligent in her work for Bistro, most courts would hold her liable to Bistro and

Negligence cases against professionals often focus on the standard of care exercised by the professional.

Under rules of professional conduct, a lawyer should not engage in conduct involving "dishonesty."