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Exam 33: Liability of Accountants and Other Professionals

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Question 1

Multiple Choice

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

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

E) All of the above
F) None of the above

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Question 2

Multiple Choice

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Lauren is an attorney. Like the conduct of all attorneys, Lauren's conduct is governed by rules of professional conduct established by the state in which she is licensed, and the Model Rules of Professional Conduct of​

A) ​the Securities and Exchange Commission.
B) ​the American Bar Association.
C) ​the American Institute of Certified Public Accountants.
D) ​the International Accounting Standards Board.

E) C) and D)
F) B) and D)

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Question 3

True/False

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

For a plaintiff to recover damages under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, proof of intent is necessary.

Edward, an attorney, allows a statute of limitations to lapse on a claim by Fabrication Company, a client. Edward​

Commerce Bank files a suit against Drake, its former accountant, alleging constructive fraud. Drake may be held liable​

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

An accountant normally will notbe held liable to the client for incorrect judgment.

Under rules of professional conduct, committing a criminal act that reflects adversely on a person's "honesty" is professional misconduct.

An accountant is not liable for a false statement that affects the price of a security if the buyer or seller of the security knew the statement was false.

Brenda is an attorney whose clients include Capital Finance Company. If Brenda is negligent in her work for Capital, under the Restatement (Third) of Torts, Brenda may be liable to Capital and​

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

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

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​

Randi, an accountant, includes a false statement in a report for Social Media Marketing, Inc., that is filed with the Securities and Exchange Commission. When Theo buys stock in Social Media and loses money on the investment, he files a suit against Randi, alleging fraud under the 1934 Securities Exchange Act. To avoid liability, Randi can show that she​

Professionals are required to deliver services but the competency of the services is never an issue.

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

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

Tyson accuses Ulman, an attorney, of committing malpractice. Malpractice is​

An accountant may be liable for a misstatement or omission of material fact in a registration statement.