Exam 48: A: Professional Liability and Accountability

Generally,an accountant must exercise the degree of care that an ordi?narily prudent accountant would exercise.

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

Attorneys are required to be familiar with well-settled principles of law applicable to a casa.

Bruno is an accountant.Under the Sarbanes-Oxley Act of 2002,the de?gree of government oversight over the public accounting practices of Bruno and other accountants was

Malpractice is professional negligence.

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

Generally,an attorney is not liable to a nonclient unless the attorney has committed fraud.

Bryce's accountant is Caleb and his attorney is Delilah.All states pro?tect,as privileged information,Bryce's communications with

Doug is an accountant whose clients include Everyday Products,Inc.(EPI).Under the Ultramares rule,if Doug is negligent in his work for EPI,he could be liable to

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

Traditionally,a professional owed no duty to those with whom the pro?fessional had a direct contractual relationship.

Under the Sarbanes-Oxley Act of 2002,accountants must retain working papers relating to an audit or review for a certain period of time.

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

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 por?trayal 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?

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

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

Professionals are obligated to adhere to standards of performance com?monly accepted within their profession.

Nina,an accountant,prepares for Omni Corporation a financial state?ment that misstates a material fact.The statement is included in Omni's regis?tration statement.Pete,who is in privity with Nina,and Quinn,who is not,each buy Omni stock.Under Section 11 of the Securities Act of 1933,Nina may be liable to

Beth is an accountant with Consumer Sales Corporation.Doral buys Consumer 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

Quibble 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 net worth.Town Bank re?lies on the balance sheet to make a loan to Quibble.When Quibble de?faults,Town files a suit against Roo & Slay.Under the Restatement rule,Roo & Slay is most likely