Question 1

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

Accepted Answer

A) embezzlement. 
B) general misconduct. 
C) professional negligence. 
D) throwing something out of a window. 
A) embezzlement. 
B) general misconduct. 
C) professional negligence. 
D) throwing something out of a window. A

Question 2

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 Internal Revenue Code,liability for preparing a false return may be imposed on

Accepted Answer

A) Lacy and Muff. 
B) Lacy only. 
C) Muff only. 
D) neither Lacy nor Muff. 
A) Lacy and Muff. 
B) Lacy only. 
C) Muff only. 
D) neither Lacy nor Muff. A

Question 3

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

Accepted Answer

A) nothing. 
B) scienter,fraud,and reliance only. 
C) scienter,fraud,reliance,and materiality only. 
D) scienter,fraud,reliance,materiality,and causation. 
A) nothing. 
B) scienter,fraud,and reliance only. 
C) scienter,fraud,reliance,and materiality only. 
D) scienter,fraud,reliance,materiality,and causation. D

Question 4

An accountant's violation of generally accepted accounting principles is prima facie evidence of negligence.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) Pam relied on the omission. 
B) Pam suffered a loss on the stock. 
C) Pam knew about the omission before making her purchase. 
D) the omission had no causal connection to her loss. 
A) Pam relied on the omission. 
B) Pam suffered a loss on the stock. 
C) Pam knew about the omission before making her purchase. 
D) the omission had no causal connection to her loss.

Question 6

Estes,an accountant,contracts to perform services for Frasier.In performing those services,Estes uncovers a suspicious financial transaction.Estes is most likely not liable if he

Accepted Answer

A) acted negligently in failing to discover the transaction sooner. 
B) conceals the discovery and otherwise finishes the work. 
C) investigates and reports the discovery to Frasier. 
D) obtains restitution from the perpetrator without Frasier's knowledge. 
A) acted negligently in failing to discover the transaction sooner. 
B) conceals the discovery and otherwise finishes the work. 
C) investigates and reports the discovery to Frasier. 
D) obtains restitution from the perpetrator without Frasier's knowledge.

Question 7

Tiny is an accountant.Tiny's violation of generally accepted accounting principles and generally accepted auditing standards

Accepted Answer

A) does not indicate that Tiny was negligent. 
B) is prima facie evidence that Tiny was negligent. 
C) precludes Tiny from raising any defense against a negligence claim. 
D) will never subject Tiny to liability. 
A) does not indicate that Tiny was negligent. 
B) is prima facie evidence that Tiny was negligent. 
C) precludes Tiny from raising any defense against a negligence claim. 
D) will never subject Tiny to liability.

Question 8

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

Accepted Answer

A) a felony punishable by a fine and imprisonment. 
B) a felony punishable only by a fine. 
C) a misdemeanor punishable only by a fine. 
D) a civil violation subject to a liability suit but not a crime. 
A) a felony punishable by a fine and imprisonment. 
B) a felony punishable only by a fine. 
C) a misdemeanor punishable only by a fine. 
D) a civil violation subject to a liability suit but not a crime.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) actual fraud. 
B) constructive fraud. 
C) destructive fraud. 
D) virtual fraud. 
A) actual fraud. 
B) constructive fraud. 
C) destructive fraud. 
D) virtual fraud.

Question 11

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

Accepted Answer

A) Caleb and Delilah. 
B) Caleb only. 
C) Delilah only. 
D) neither Caleb nor Delilah. 
A) Caleb and Delilah. 
B) Caleb only. 
C) Delilah only. 
D) neither Caleb nor Delilah.

Question 12

A professional cannot be liable for fraud in the absence of fraudulent intent.

Accepted Answer

A) True 
 B)False

Question 13

Daisy Daycare,Inc.,files a suit against Eldon,its former accountant,alleging constructive fraud.Eldon may be held liable

Accepted Answer

A) if Daisy cannot prove actual fraud. 
B) if Eldon was grossly negligent in the performance of his duties. 
C) only if Eldon acted with fraudulent intent. 
D) only if the court adopts the Ultramares rule. 
A) if Daisy cannot prove actual fraud. 
B) if Eldon was grossly negligent in the performance of his duties. 
C) only if Eldon acted with fraudulent intent. 
D) only if the court adopts the Ultramares rule.

Question 14

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

Accepted Answer

A) liable for breach of contract. 
B) not liable,because Leslie is a professional. 
C) not liable,because Leslie's failure must have been Marty's fault. 
D) not liable,because the work took longer than foreseen. 
A) liable for breach of contract. 
B) not liable,because Leslie is a professional. 
C) not liable,because Leslie's failure must have been Marty's fault. 
D) not liable,because the work took longer than foreseen.

Question 15

An attorney may be liable in negligence to any third party who the attorney knows will rely on the attorney's work.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

A failure to follow generally accepted accounting principles and generally accepted auditing standards is proof of a lack of due diligence.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) liable if Jaime failed to discover a defalcation. 
B) liable if Jaime failed to discover a fraud. 
C) liable if Jaime failed to discover an impropriety. 
D) not liable. 
A) liable if Jaime failed to discover a defalcation. 
B) liable if Jaime failed to discover a fraud. 
C) liable if Jaime failed to discover an impropriety. 
D) not liable.

Question 19

Each state establishes rules that govern the conduct of attorneys

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) liable because Roo & Slay owed a duty of care to Quibble. 
B) liable because Roo & Slay owed a duty to any foreseeable user. 
C) liable if Roo & Slay knew that Town would rely on the balance sheet. 
D) not liable because Roo & Slay and Town were not in privity. 
A) liable because Roo & Slay owed a duty of care to Quibble. 
B) liable because Roo & Slay owed a duty to any foreseeable user. 
C) liable if Roo & Slay knew that Town would rely on the balance sheet. 
D) not liable because Roo & Slay and Town were not in privity.

Exam 42: Liability of Accountants Other Professionals

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

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 Internal Revenue Code,liability for preparing a false return may be imposed on

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

An accountant's violation of generally accepted accounting principles is prima facie evidence of negligence.

Estes,an accountant,contracts to perform services for Frasier.In performing those services,Estes uncovers a suspicious financial transaction.Estes is most likely not liable if he

Tiny is an accountant.Tiny's violation of generally accepted accounting principles and generally accepted auditing standards

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

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

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

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

A professional cannot be liable for fraud in the absence of fraudulent intent.

Daisy Daycare,Inc.,files a suit against Eldon,its former accountant,alleging constructive fraud.Eldon may be held liable

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

An attorney may be liable in negligence to any third party who the attorney knows will rely on the attorney's work.

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

A failure to follow generally accepted accounting principles and generally accepted auditing standards is proof of a lack of due diligence.

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

Each state establishes rules that govern the conduct of attorneys

The Legal Environment

Constitutional Law

Courts and Alternative Dispute Resolution

Torts and Cyber Torts

Intellectual Property and Internet Law

Criminal Law

Cyber Crime

Ethics and Business Decision Making

Nature and Classification

Agreement in Traditional and E-Contracts

Consideration

Capacity and Legality

Voluntary Consent

The Statute of Fraudswriting Requirement

Performance and Discharge

Breach and Remedies

Third Party Rights

The Formation of Sales and Lease Contracts

Title and Risk of Loss

Performance Breach of Sales Lease Contracts

Warranties and Product Liability

Negotiable Instruments: Transferability Liability

Checks and Banking in the Digital Age

Security Interests in Personal Property

Other Creditors Remedies and Suretyship

Bankruptcy

International Law in a Global Economy

Agency Relationships in Business

Employment, immigration, and Labor Law

Employment Discrimination

Sole Proprietorships and Private Franchises

All Forms of Partnerships

Limited Liability Companies Special Business Forms

Corporate Formation and Financing

Corporate Directors,officers, Shareholders

Corporate Acquisitions, takeovers, Termination

Investor Protection,insider Trading, Corp Gov

Administrative Law

Promoting Competition

Consumer Law

Environmental Law

Personal Property and Bailments

Real Property and Landlord-Tenant Law

Insurance,wills,and Trusts

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