Exam 51: Professional Liaility and Accountability

Meri, an accountant, includes a false statement in a report for Novelty Paper Products, Inc. (NPPI) that is filed with the Securities and Exchange Com?mission. When Otho buys stock in NPPI and loses money on the investment, he files a suit against Meri, alleging fraud under the 1934 Securities Exchange Act. To avoid liability, Meri can show that she

Lacy is an accountant who prepares her clients' tax returns. Muff is not an accountant, but he also prepares tax returns for clients. Under the In?ternal Revenue Code, liability for preparing a false return may be im?posed on

A tax preparer that fails to give a taxpayer a copy of his or her tax return may be subject to penalty under the Internal Revenue Code.

In most courts, accountants can be liable for negligence to any known us?ers of the accountants' finan?cial reports.

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

Feder prepares federal corporate income tax returns for Giant Stores, Inc., and other firms. Under the Internal Revenue Code, with respect to an understatement of a client's tax liability, Feder may be liable for

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

A professional who intentionally misstates a material fact to mislead a client may be liable for actual fraud.

Accountants are not subject to criminal penalties for violations of federal securities laws.

National Business Systems Corporation (NBS) files a suit against Molly, its former accountant, alleging constructive fraud. NBS need not prove

Jerzy is an accountant whose clients include Kopper Kettle Restaurants, Inc. For a violation of securities laws, Jerzy may be subject to

At common law, professionals may be liable to clients for breach of contract.

Gen?erally ac?cepted accounting principles represent guidelines rather than a standard of care.

An attorney may be liable to a third party who relies on the attorney's legal opinion to the third party's detriment

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

Gert, an accountant, contracts to conduct an audit for Hailey. In performing the audit, Gert fails to detect certain misconduct. Gert is most likely

Craig is an accountant whose clients include Digby National Corporation. Elbert is Craig's attorney. Working papers that Craig develops when preparing financial reports for Digby are owned by

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

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