Exam 48: Professional Liaility and Accountability

Marquis Company's liabilities exceed its assets,but the firm's employees falsify its books to reflect a positive net worth.Marquis hires Nan & Ollie,an accounting firm,to prepare a balance sheet,which is certified to show a net worth.Pure Credit Corporation relies on the balance sheet to make a loan to Marquis.When the firm defaults,Pure Credit files a suit against Nan & Ollie.Under the Ultramares rule,the accounting firm is most likely

Jim,an attorney,allows a statute of limitations to lapse on a claim by Midwest Manufacturing Company,a client.Jim

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.

Pace is an attorney,whose clients include Quikfeet Running Shoes Company.Unless Quikfeet has violated securities law,the contents of Pace's file on Quikfeet may be disclosed to someone other than Quikfeet

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

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

Bob,an accountant,intentionally misstates a material fact to mislead Consolidated Industries,Inc.,a client.Consolidated justifiably relies on the misstatement to its detriment.Bob is most likely liable for

Accountants and other professionals do not face liability under the common law for any breach of contract.

Under rules of professional conduct,an attorney should not engage in conduct involving "misrepresentation."

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

Flynn,an accountant,helps Grange Supply Company prepare and file a false federal corporate income tax return.Under the In?ternal Revenue Code,this is

Lebron accuses Moe,an attorney,of committing malpractice.Malpractice is

Sian,an accountant,prepares a tax return for a client,Toy Sales Company.Vita,who is not an accountant,prepares a tax return for Wu's business,Xtra Delivery Service.Is an accountant who prepares a tax return for a client liable for any false statements in the return? Is a person who is not an accountant and who prepares a tax return for some?one else liable for any false statements in the return?

Rollo is an attorney whose clients include Superior Credit Company.If Rollo is negligent in his work for Superior,under the Restatement (Second)of Torts,Rollo may be liable to Superior and

The Sarbanes-Oxley Act of 2002 applies only to domestic public accounting firms that provide auditing services to "issuers."

An accountant may be liable for a misstatement or omission of material fact in a registration statement.

Under rules of professional conduct,committing a criminal act that reflects adversely on a person's "honesty" is professional misconduct.

An accountant is not liable for a misstatement in a registration statement to a purchaser of securities if the misstatement was not of a material fact.

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

Faith and Gordon are accountants who work together.Faith and Gordon can limit their potential liability for each other's misconduct by organizing their business as