Exam 41: Liability of Accountants Other Professionals

An accountant can avoid liability by proving that his or her negligence was only the proximate cause of the cli?ent's loss.

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

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

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

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

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.

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

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

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

Quin, an accountant, prepares for Reddy, Inc., a financial state?ment that omits a material fact. The statement is included in Reddy's registration statement with the Securities and Exchange Commission. Timor, who reads the statement, and Ubi, who does not, each buy Reddy stock. Velma reads the statement but does not buy the stock. Under Section 11 of the Securities Act of 1933, Quin may be liable to

A qualified opinion must be specific and identify the reason for the qualification.

Dwayne can be described as "a reasonably competent general practitioner of ordinary skill, experience, and capacity." This is the normal standard for judging the performance of

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

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

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

Filtration Products, Inc., files a suit against Emmett, its former accountant, al?leging constructive fraud. Emmett may be held liable

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

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

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

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