Question 1

In most courts, accountants are subject to liability for negligence only to their clients.​

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Professionals are governed by the contracts they enter into with their clients.​

Accepted Answer

A) True 
 B)False

Question 4

Nguyen Imports, Inc., accuses Ogilvie, an accountant, of committing defalcation. This is​

Accepted Answer

A)   ​embezzlement.
B)   ​general misconduct.
C)   ​professional negligence.
D)   ​misrepresentation of professional expertise.E) A) and B)
F) A) and D)

Question 5

Negligence cases against professionals often focus on the standard of care exercised by the professional.​

Accepted Answer

A) True 
 B)False

Question 6

Under federal law, communications between an accountant and his or her client are privileged.​

Accepted Answer

A) True 
 B)False

Question 7

For a plaintiff to recover damages from an accountant under Section 10(b) of the Securities Exchange Act of 1934, ordinary negligence is not enough.​

Accepted Answer

A) True 
 B)False

Question 8

Ailing Company's liabilities exceed its assets. Ailing hires Brad, an accountant, to certify a balance sheet showing a positive net worth. Credit Bank relies on the balance sheet to make a loan to Ailing. The firm defaults on the loan. Under the Ultramares rule, Brad is most likely not liable because he​

Accepted Answer

A)   ​did not owe a duty of care to any third party.
B)   ​is not responsible for his client's finances.
C)   ​finished his work before Ailing's loan and default.
D)   ​was not in privity with the bank.E) C) and D)
F) B) and D)

Question 9

Delaney is an accountant charged with negligence by Estimation & Valuation Services Inc., a client. Delaney may successfully defend against the claim if he can show that​

Accepted Answer

A)   ​scienter was lacking.
B)   ​he complied with all International Financial Reporting Standards.
C)   ​the negligence was not the proximate cause of the client's losses.
D)   ​the negligence was only contributory.E) B) and C)
F) All of the above

Question 10

Under rules of professional conduct, a lawyer should not engage in conduct involving "dishonesty."​

Accepted Answer

A) True 
 B)False

Question 11

Taylor is an accountant whose clients include Universal Metrics Corporation. Vera is Taylor's attorney. Working papers that Taylor develops when preparing financial reports for Universal Metrics are owned by​

Accepted Answer

A)   ​Taylor.
B)   ​Universal.
C)   ​Vera.
D)   ​no one-the papers must be destroyed immediately after use.E) All of the above
F) C) and D)

Question 12

Accountants must surrender possession of working papers relating to an audit or review to the party for whom the work was performed.​

Accepted Answer

A) True 
 B)False

Question 13

An accountant's liability under the Securities Act of 1933 does I require privity of contract with the purchaser of a security.​

Accepted Answer

A) True 
 B)False

Question 14

Cathy is an accountant with Discount Retail Corporation. Efrem buys Discount Retail stock and loses money on the investment. To recover from Cathy under Section 10(b)  of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove​

Accepted Answer

A)   ​only the purchase and sale of a security.
B)   ​fraud, reliance, materiality, and lack of knowledge about securities.
C)   ​fraud, reliance, materiality, and incompetence.
D)   ​fraud, reliance, materiality, causation, and scienter.E) A) and B)
F) C) and D)

Question 15

Fact Pattern 47-1​
Nelson, an accountant, enters into a contract to provide services to Operational Processes, Inc. (OPI) . Nelson does not finish the work within the contract's deadline. This causes OPI to fail to meet certain other deadlines owed to Prime Bank, which results in the firm's payment of penalties to the bank.
-Refer to Fact Pattern 47-1. Nelson is​

Accepted Answer

A)   ​liable for breach of contract.
B)   ​not liable, because Nelson is a professional.
C)   ​not liable, because Nelson's failure must have been OPI's fault.
D)   ​not liable, because the work took longer than foreseen.E) A) and C)
F) None of the above

Question 16

Beck is an accountant who prepares her clients' tax returns. Cole 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)   ​Beck and Cole.
B)   ​Beck only.
C)   ​Cole only.
D)   ​none of the choices.E) B) and D)
F) C) and D)

Question 17

Accountants are exempt from the criminal provisions of federal tax laws.​

Accepted Answer

A) True 
 B)False

Question 18

April is an accountant whose clients include Bistro Restaurants Inc. If April is negligent in her work for Bistro, most courts would hold her liable to Bistro and​

Accepted Answer

A)   ​any third party.
B)   ​no third party with whom the accountant is not in privity or "near privity."
C)   ​third parties who are foreseen users of the work.
D)   ​third parties who are reasonably foreseeable users of the work.E) All of the above
F) A) and B)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 47: Professional Liability and Accountability

Cathy is an accountant with Discount Retail Corporation. Efrem buys Discount Retail stock and loses money on the investment. To recover from Cathy under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove

Correct Answer
verified

April is an accountant whose clients include Bistro Restaurants Inc. If April is negligent in her work for Bistro, most courts would hold her liable to Bistro and

Correct Answer
verified

Accountants are exempt from the criminal provisions of federal tax laws.

Correct Answer
verified

Delaney is an accountant charged with negligence by Estimation & Valuation Services Inc., a client. Delaney may successfully defend against the claim if he can show that

Correct Answer
verified

Taylor is an accountant whose clients include Universal Metrics Corporation. Vera is Taylor's attorney. Working papers that Taylor develops when preparing financial reports for Universal Metrics are owned by

Correct Answer
verified

Negligence cases against professionals often focus on the standard of care exercised by the professional.

Correct Answer
verified

An accountant's liability under the Securities Act of 1933 does I require privity of contract with the purchaser of a security.

Correct Answer
verified

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

Correct Answer
verified

Under rules of professional conduct, a lawyer should not engage in conduct involving "dishonesty."

Correct Answer
verified

Nguyen Imports, Inc., accuses Ogilvie, an accountant, of committing defalcation. This is

Correct Answer
verified

For a plaintiff to recover damages from an accountant under Section 10(b) of the Securities Exchange Act of 1934, ordinary negligence is not enough.

Correct Answer
verified

In most courts, accountants are subject to liability for negligence only to their clients.

Correct Answer
verified

Beck is an accountant who prepares her clients' tax returns. Cole 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

Correct Answer
verified

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

Correct Answer
verified

Under federal law, communications between an accountant and his or her client are privileged.

Correct Answer
verified

Accountants must surrender possession of working papers relating to an audit or review to the party for whom the work was performed.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Professionals are governed by the contracts they enter into with their clients.

Correct Answer
verified

Exam 47: Professional Liability and Accountability

Cathy is an accountant with Discount Retail Corporation. Efrem buys Discount Retail stock and loses money on the investment. To recover from Cathy under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove​

Correct AnswerverifiedShow Answer

April is an accountant whose clients include Bistro Restaurants Inc. If April is negligent in her work for Bistro, most courts would hold her liable to Bistro and​

Correct AnswerverifiedShow Answer

Accountants are exempt from the criminal provisions of federal tax laws.​

Correct AnswerverifiedShow Answer

Delaney is an accountant charged with negligence by Estimation & Valuation Services Inc., a client. Delaney may successfully defend against the claim if he can show that​

Correct AnswerverifiedShow Answer

Taylor is an accountant whose clients include Universal Metrics Corporation. Vera is Taylor's attorney. Working papers that Taylor develops when preparing financial reports for Universal Metrics are owned by​

Correct AnswerverifiedShow Answer

Negligence cases against professionals often focus on the standard of care exercised by the professional.​

Correct AnswerverifiedShow Answer

An accountant's liability under the Securities Act of 1933 does I require privity of contract with the purchaser of a security.​

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Under rules of professional conduct, a lawyer should not engage in conduct involving "dishonesty."​

Correct AnswerverifiedShow Answer

Nguyen Imports, Inc., accuses Ogilvie, an accountant, of committing defalcation. This is​

Correct AnswerverifiedShow Answer

For a plaintiff to recover damages from an accountant under Section 10(b) of the Securities Exchange Act of 1934, ordinary negligence is not enough.​

Correct AnswerverifiedShow Answer

In most courts, accountants are subject to liability for negligence only to their clients.​

Correct AnswerverifiedShow Answer

Beck is an accountant who prepares her clients' tax returns. Cole 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​

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Under federal law, communications between an accountant and his or her client are privileged.​

Correct AnswerverifiedShow Answer

Accountants must surrender possession of working papers relating to an audit or review to the party for whom the work was performed.​

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Professionals are governed by the contracts they enter into with their clients.​

Correct AnswerverifiedShow Answer

Cathy is an accountant with Discount Retail Corporation. Efrem buys Discount Retail stock and loses money on the investment. To recover from Cathy under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, Efrem must prove

Correct Answer
verified

April is an accountant whose clients include Bistro Restaurants Inc. If April is negligent in her work for Bistro, most courts would hold her liable to Bistro and

Correct Answer
verified

Accountants are exempt from the criminal provisions of federal tax laws.

Correct Answer
verified

Delaney is an accountant charged with negligence by Estimation & Valuation Services Inc., a client. Delaney may successfully defend against the claim if he can show that

Correct Answer
verified

Taylor is an accountant whose clients include Universal Metrics Corporation. Vera is Taylor's attorney. Working papers that Taylor develops when preparing financial reports for Universal Metrics are owned by

Correct Answer
verified

Negligence cases against professionals often focus on the standard of care exercised by the professional.

Correct Answer
verified

An accountant's liability under the Securities Act of 1933 does I require privity of contract with the purchaser of a security.

Correct Answer
verified

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

Correct Answer
verified

Under rules of professional conduct, a lawyer should not engage in conduct involving "dishonesty."

Correct Answer
verified

Nguyen Imports, Inc., accuses Ogilvie, an accountant, of committing defalcation. This is

Correct Answer
verified

For a plaintiff to recover damages from an accountant under Section 10(b) of the Securities Exchange Act of 1934, ordinary negligence is not enough.

Correct Answer
verified

In most courts, accountants are subject to liability for negligence only to their clients.

Correct Answer
verified

Beck is an accountant who prepares her clients' tax returns. Cole 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

Correct Answer
verified

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

Correct Answer
verified

Under federal law, communications between an accountant and his or her client are privileged.

Correct Answer
verified

Accountants must surrender possession of working papers relating to an audit or review to the party for whom the work was performed.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Professionals are governed by the contracts they enter into with their clients.

Correct Answer
verified