Exam 30: Liability of Accountants Other Professionals

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

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

Pat,an accountant,includes a false statement in a report for Quantity Overstock,Inc. ,that is filed with the Securities and Exchange Commission.Quantity publishes a misleading ad about its future prospects.Rita sees the ad and calls Stan,who buys stock in Quantity.Under Section 18 of the Securities Exchange Act of 1934,liability may attach to

A client's negligence is never a defense to a charge of negligence against an accountant.

Under rules of professional misconduct,an attorney should not engage in conduct involving deceit.

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

Lulu,an accountant,conducts an audit of Microstuff Toys,Inc.After the conclusion of the audit,the working papers created in preparing the audit must be

An accountant's liability under the Section 10(b)and Rule 10b-5 of the Securities Exchange Act of 1934 requires privity of contract.

Accountants and other professionals may not be held liable for negligence in the performance of their service.

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.

An opinion that disclaims any liability for false or misleading financial statements is too general.

Professionals are obligated to adhere to standards of performance generally accepted within their profession.

In most courts,auditors cannot be held liable to third parties for negligence in the performance of their duties.

Grover Nut Company files a suit against Hud,its former accountant,alleging actual fraud.Grover must prove

Lebron,an attorney,allows a statute of limitations to lapse on a claim by Midwest Metal Fabrication Company,a client.Lebron

Hadley,an accountant,accumulates working papers while performing an audit for Ilene.After the audit,these documents belong to

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

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

Generally,an accountant must exercise the degree of care that an ordinarily prudent accountant would exercise.

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 positive 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