Exam 40: Liability of Accountants and Other Professionals

Generally,an accountant must exercise the degree of care that an ordinarily prudent accountant would exercise.

Gift Basket Company's liabilities exceed its assets. Gift Basket hires Hill & Dale,an accounting firm,to prepare a balance sheet. Through Hill & Dale's negligent omissions,the sheet shows a net worth. Investment Bank relies on the balance sheet to make a loan to Gift Basket. When Gift Basket defaults,the bank files a suit against Hill & Dale. Under the Restatement (Third)of Torts,Hill & Dale is most likely

Hernando,an accountant,helps Industrial Equipment & Supplies Company prepare and file a false federal corporate income tax return. Under the Internal Revenue Code,this is

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.

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

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

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

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

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

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

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

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

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

For a plaintiff to recover damages under Section 10(b)of the Securities Exchange Act of 1934 and SEC Rule 10b-5,proof of intent is necessary.

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

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

An accountant is not liable for an omission in a registration statement to a purchaser of securities if the omission had no causal connection to the purchaser's loss.

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

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

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.