Question 1

In recent years,more and more courts have followed the Ultramares doctrine in deciding cases.

Accepted Answer

A) True 
 B)False  False

Question 2

An accountant is generally held to be the owner of the working papers he uses in performing an audit.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following is correct with respect to the accountant-client privilege?

Accepted Answer

A) The common law recognizes such a privilege. 
B) Federal law recognizes such a privilege. 
C) Some states statutorily recognize such a privilege. 
D) All of the above are correct. 
A) The common law recognizes such a privilege. 
B) Federal law recognizes such a privilege. 
C) Some states statutorily recognize such a privilege. 
D) All of the above are correct. C

Question 4

Which of the following would NOT constitute scienter?

Accepted Answer

A) Negligent performance of a substandard audit. 
B) Actual knowledge of fraud. 
C) Reckless disregard for truth. 
D) Being paid to conceal fraud. 
A) Negligent performance of a substandard audit. 
B) Actual knowledge of fraud. 
C) Reckless disregard for truth. 
D) Being paid to conceal fraud.

Question 5

Which of the following is correct with regard to an accountant's contractual liability?

Accepted Answer

A) An accountant is bound to perform all the duties she explicitly agrees to perform. 
B) An accountant implicitly agrees to perform a contract in a competent and professional manner. 
C) An accountant who breaches his contract with a client may also be liable to a third party intended beneficiary. 
D) All of the above are correct. 
A) An accountant is bound to perform all the duties she explicitly agrees to perform. 
B) An accountant implicitly agrees to perform a contract in a competent and professional manner. 
C) An accountant who breaches his contract with a client may also be liable to a third party intended beneficiary. 
D) All of the above are correct.

Question 6

In providing services for his client,an accountant obtains information concerning the client's business affairs.What are the legal issues concerning this client information?

Accepted Answer

The legal issues concerning the client's

Question 7

Which of the following is a true statement concerning the accountant-client privilege?

Accepted Answer

A) If information is considered to be an accountant-client privilege, it may not be admitted into evidence over the objection of the accountant only. 
B) Neither the common law nor federal law recognizes the accountant-client privilege. 
C) Some states have adopted statutes grating some form of the accountant-client privilege. 
D) Both (a) and (b). 
E) Both (b) and (c). 
A) If information is considered to be an accountant-client privilege, it may not be admitted into evidence over the objection of the accountant only. 
B) Neither the common law nor federal law recognizes the accountant-client privilege. 
C) Some states have adopted statutes grating some form of the accountant-client privilege. 
D) Both (a) and (b). 
E) Both (b) and (c).

Question 8

Diane prepared a registration for the first issuance of stock of the Ledmar Corporation.Diane took the assignment very seriously and spent a great deal of time preparing the statement.Two years after the statement was filed,the SEC began to investigate the company and claims that the information in Diane's statement was misleading,because some of the information given to her by the corporation was false.Diane had tried to verify the information,but was not able to do so.An investor is now suing Diane claiming that she violated the 1933 act.Is Diane liable?

Accepted Answer

Diane will be able to avoid liability by

Question 9

Both the common law and federal law recognize an accountant-client privilege.

Accepted Answer

A) True 
 B)False

Question 10

Criminal sanctions for accountants are limited to punitive fines.

Accepted Answer

A) True 
 B)False

Question 11

Most courts allow an accountant to raise the defense of the plaintiff's contributory or comparative negligence.

Accepted Answer

A) True 
 B)False

Question 12

Under the Securities Exchange Act of 1934,an accountant's liability for false or misleading statements is based on a good faith negligence standard.

Accepted Answer

A) True 
 B)False

Question 13

What are the requisite elements of fraud?

Accepted Answer

The requisite elements of fraud include:

Question 14

Martin agrees to perform an audit within 30 days,knowing that time is of the essence.After the 30 days,Martin has only performed 60% of the audit.Martin has materially breached his contract.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following could give rise to an accountant's criminal liability?

Accepted Answer

A) Falsely completing a tax return. 
B) Tampering with accounting records. 
C) Advising a client to falsely complete his own tax return. 
D) All of the above could subject an accountant to criminal liability. 
A) Falsely completing a tax return. 
B) Tampering with accounting records. 
C) Advising a client to falsely complete his own tax return. 
D) All of the above could subject an accountant to criminal liability.

Question 16

An accountant who substantially performs his contractual duties is generally entitled to be compensated for the contractually agreed-upon fee,less any damages caused to the client.

Accepted Answer

A) True 
 B)False

Question 17

Pam certified a statement prepared by John,her employee,without checking John's work.He was never known to be anything but diligent and his integrity had never been questioned.The audit contained gross misstatements.Pam defends a suit against her claiming "due diligence." She will:

Accepted Answer

A) succeed, since she had no reason to believe her employee would lie. 
B) succeed, because a reasonable person would have inquired further. 
C) fail, because due diligence requires reasonable investigation. 
D) fail, because she is automatically liable for her employee's act. 
A) succeed, since she had no reason to believe her employee would lie. 
B) succeed, because a reasonable person would have inquired further. 
C) fail, because due diligence requires reasonable investigation. 
D) fail, because she is automatically liable for her employee's act.

Question 18

In which of the following types of cases can issues of accountant-client confidentiality arise?

Accepted Answer

A) Civil litigation. 
B) Criminal cases. 
C) Tax cases. 
D) All of the above are situations where it can arise. 
A) Civil litigation. 
B) Criminal cases. 
C) Tax cases. 
D) All of the above are situations where it can arise.

Question 19

Historically,an accountant's liability for negligence extended only to the client and third party beneficiaries.

Accepted Answer

A) True 
 B)False

Question 20

In which of the following situations would an accountant be subject to criminal liability?

Accepted Answer

A) Where the accountant negligently performed an audit. 
B) Where the accountant willfully omitted a material fact on a securities registration statement. 
C) Where the accountant refused to turn over working papers to a client. 
D) Where the accountant willfully breached a contract. 
A) Where the accountant negligently performed an audit. 
B) Where the accountant willfully omitted a material fact on a securities registration statement. 
C) Where the accountant refused to turn over working papers to a client. 
D) Where the accountant willfully breached a contract.

Exam 43: Accountants Legal Liability

In recent years,more and more courts have followed the Ultramares doctrine in deciding cases.

An accountant is generally held to be the owner of the working papers he uses in performing an audit.

Which of the following is correct with respect to the accountant-client privilege?

Which of the following would NOT constitute scienter?

Which of the following is correct with regard to an accountant's contractual liability?

In providing services for his client,an accountant obtains information concerning the client's business affairs.What are the legal issues concerning this client information?

Which of the following is a true statement concerning the accountant-client privilege?

Both the common law and federal law recognize an accountant-client privilege.

Criminal sanctions for accountants are limited to punitive fines.

Most courts allow an accountant to raise the defense of the plaintiff's contributory or comparative negligence.

Under the Securities Exchange Act of 1934,an accountant's liability for false or misleading statements is based on a good faith negligence standard.

What are the requisite elements of fraud?

Martin agrees to perform an audit within 30 days,knowing that time is of the essence.After the 30 days,Martin has only performed 60% of the audit.Martin has materially breached his contract.

Which of the following could give rise to an accountant's criminal liability?

An accountant who substantially performs his contractual duties is generally entitled to be compensated for the contractually agreed-upon fee,less any damages caused to the client.

Pam certified a statement prepared by John,her employee,without checking John's work.He was never known to be anything but diligent and his integrity had never been questioned.The audit contained gross misstatements.Pam defends a suit against her claiming "due diligence." She will:

In which of the following types of cases can issues of accountant-client confidentiality arise?

Historically,an accountant's liability for negligence extended only to the client and third party beneficiaries.

In which of the following situations would an accountant be subject to criminal liability?

Introduction to Law

Business Ethics

Civil Dispute Resolution

Constitutional Law

Administrative Law

Criminal Law

Intentional Torts

Negligence and Strict Liability

Introduction to Contracts

Mutual Assent

Conduct Invalidating Assent

Consideration

Illegal Bargains

Contractual Capacity

Contracts in Writing

Third Parties to Contracts

Performance, Breach, and Discharge

Contract Remedies

Introduction to Sales and Leases

Performance

Transfer of Title and Risk of Loss

Product Liability: Warranties and Strict Liability

Sales Remedies

Form and Content

Transfer and Holder in Due Course

Liability of Parties

Bank Deposits, Collections, and Funds Transfers

Relationship of Principal and Agent

Relationship With Third Parties

Formation and Internal Relations of General Partnerships

Operation and Dissolution of General Partnerships

Limited Partnerships and Limited Liability Companies

Nature and Formation of Corporations

Financial Structure of Corporations

Management Structure of Corporations

Fundamental Changes of Corporations

Secured Transactions and Suretyship

Bankruptcy

Securities Regulation

Intellectual Property

Employment Law

Antitrust

Consumer Protection

Environmental Law

International Business Law

Introduction to Property, property Insurance, Bailments, and Documents of Title

Interests in Real Property

Transfer and Control of Real Property

Trusts and Wills

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