Exam 22: Professional Liability and Accountability

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​

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​

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

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.

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

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

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.

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

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​

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​

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​

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​