Exam 30: Liability of Accountants and Other Professionals

Dominique,a certified public accountant,provides accounting serv-ices to Eagle Corporation.The services include preparing Eagle's financial re-ports and issuing opinion letters based on the reports.In 2008,Eagle falls into serious financial trouble,but neither Dominique's reports nor her opinion let-ters indicate this situation.Relying on Dominique's portrayal of Eagle's finan-cial situation,Eagle borrows a large sum of money to build a new ship-ping facility.In lending Eagle the money,First National Bank relies on Dominique's opinion letter.Dominique is aware of this reliance.If Dominique did not en-gage in intentional fraud but was negligent,what is her potential liability?

Toby is an accountant whose clients include U-All Company.If Toby is negligent in his work for U-All,most courts would hold him liable to U-All and

Jaime,an accountant,contracts to perform services for Kase.Jaime acts in good faith and conforms to generally accepted accounting principles,but makes a mistake in judgment.Jaime is most likely

In most courts,auditors cannot be held liable to third parties for negligence in the performance of their duties.

A professional can be liable for fraud whether or not he or she acted with fraudulent intent.

If a third party will be affected by a contract,the parties to the contract are in privity with the third party.

Under rules of professional misconduct,an attorney should not engage in conduct involving deceit.

An accountant is not liable for a misleading statement that affects the price of a security if the accountant acted in good faith.

An accountant's liability under the Securities Act of 1933 re-quires privity of contract with the purchaser of a security.

Leslie,an accountant,enters into a contract to provide services to Marty.Leslie does not finish the work within the contract's deadline.Leslie is

Lulu,an accountant,conducts an audit of Microstuff Toys,Inc.After the conclu-sion of the audit,the working papers created in preparing the audit must be

Professionals are obligated to adhere to standards of performance generally accepted within their profession.

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

Pluto accuses Quark,an accountant,of committing defalcation.This is

An accountant's working papers are the documents that are used and developed during an audit.

Quibble Game Company's liabilities exceed its assets.Quibble hires Roo & Slay,an accounting firm,to prepare a balance sheet.Through Roo & Slay's negligent omissions,the sheet shows a positive net worth.Town Bank relies on the balance sheet to make a loan to Quibble.When Quibble defaults,Town files a suit against Roo & Slay.Under the Restatement rule,Roo & Slay is most likely

Longway Trucking,Inc.,files a suit against Midge,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 in recovering damages,Longway must show that Midge

Lucille,an accountant,is subject to the ac-counting conventions,rules,and procedures that constitute generally ac-cepted accounting principles (GAAP).GAAP are determined by

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

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