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Exam 22: Professional Liability and Accountability

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Question 21

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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​

A) ​Taylor.
B) ​Universal.
C) ​Vera.
D) ​no one-the papers must be destroyed immediately after use.

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

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Question 22

Multiple Choice

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Geoff is an attorney, whose clients include Hydroponic Superstores, Inc. Unless Hydroponic has violated securities law, the contents of Geoff's file on Hydroponic may be disclosed to someone other than the firm​

A) ​under no circumstances.
B) ​only under a court order (with or without Hydroponic's consent) .
C) ​only with Hydroponic's consent.
D) ​under any circumstances.

E) None of the above
F) A) and B)

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Question 23

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Traditionally, a professional owed a duty to those with whom the professional had a direct contractual relationship to perform a service and to any third party who relied on that service.

Miriam is an accountant. Natalie is an attorney. Which professional is most restricted from disclosing her or his client's communication?​

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​

Reliant Funds, Inc., files a suit against Saul, an accountant, under the antifraud provisions of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission. To succeed, Reliant Funds must show that Saul​

Finola, a certified public accountant, provides accounting services to Global Trade Corporation. The services include preparing Global Trade's financial reports and issuing opinion letters based on the reports. In 2014, Global Trade falls into serious financial trouble, but neither Finola's reports nor her opinion letters indicate this situation. Relying on Finola's portrayal of Global Trade's financial situation, the firm borrows a large sum of money to build a new shipping facility. In lending Global Trade the money, Harbor City Bank relies on Finola's opinion letter. Finola is aware of this reliance. If Finola did not engage in intentional fraud but was negligent, what is her potential liability?​

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

Under rules of professional conduct, state authorities can discipline professionals for misconduct.

Digital Systems Corporation files a suit against Ethan, its former accountant, alleging constructive fraud. Digital Systems need not prove​

In all cases involving allegations of negligence, the plaintiff must prove that the professional's breach of the duty of care actually caused some injury.

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

Accountants and other professionals face liability under the common law for any breach of contract.

Odette, an accountant, contracts to perform services for Percy. Odette acts in good faith and conforms to generally accepted accounting principles, but makes an incorrect judgment. Odette is most likely​

In an opinion, an auditor can include a general statement disclaiming any liability for false or misleading financial statements.

Fact Pattern 22-1 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 22-1.OPI may be entitled to​

Odell, an accountant, prepares for Pronto Tacos Corporation a financial statement that omits a material fact. The financial statement is included in Pronto Tacos's registration statement, which Qiana reads. Qiana buys Pronto Tacos stock. Under Section 11 of the Securities Act of 1933, for Odell to be liable for the omission, Qiana must show that she​

Diderot's accountant is Esteban and his attorney is Figaro. All states protect, as privileged information, Diderot's communications with​

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

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