Question 1

A professional whose client justifiably relies on the professional's mis?statement may be liable for constructive fraud.

Accepted Answer

A) True 
 B)False  False

Question 2

Tom is an attorney. Tom's conduct is governed by rules of professional conduct established by the state in which he is licensed, and the Code of Professional Responsibility and Model Rules of Professional Conduct drafted by

Accepted Answer

A)   federal courts.
B)   the American Bar Association.
C)   the American Institute of Certified Public Accountants.
D)   the Financial Accounting Standards Board.E) B) and C)
F) A) and B)

Question 3

Jim, an attorney, allows a statute of limitations to lapse on a claim by Midwest Manufacturing Company, a client. Jim

Accepted Answer

A)   can be held liable for malpractice.
B)   has violated an ethical standard but cannot be held liable.
C)   is subject to criminal penalties under the statute of limitations.
D)   will be automatically disbarred.E) B) and C)
F) A) and D)

Question 4

An accountant who prepares a financial state?ment in good faith may avoid liability under Section 18 of the Securities Ex?change Act.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Each state establishes rules that govern the conduct of attorneys

Accepted Answer

A) True 
 B)False

Question 7

Rex, an accountant, enters into a contract to provide services to Sofi. Rex does not finish the work within the contract's deadline. Sofi pays a penalty for the missed deadline and hires Trey to complete the job. Rex is most likely liable for

Accepted Answer

A)   nothing.
B)   Sofi's penalty and the cost to hire Trey.
C)   Sofi's penalty only.
D)   the cost to hire Trey only.E) A) and B)
F) A) and C)

Question 8

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

Accepted Answer

A)   if Delta cannot prove actual fraud.
B)   if Evan was grossly negligent in the performance of his duties.
C)   only if Evan acted with fraudulent intent.
D)   only if the court adopts the Ultramares rule.E) B) and C)
F) None of the above

Question 9

Lee, an accountant, is subject to the ac?counting conventions, rules, and procedures that constitute generally ac?cepted accounting principles (GAAP) . GAAP are determined by

Accepted Answer

A)   state courts.
B)   the American Bar Association.
C)   the American Institute of Certified Public Accountants.
D)   the Financial Accounting Standards Board.E) A) and B)
F) B) and C)

Question 10

Under state rules of professional misconduct, an attorney should not engage in conduct involving "dishonesty."

Accepted Answer

A) True 
 B)False

Question 11

Bryce's accountant is Caleb and his attorney is Delilah. All states protect, as privileged information, Bryce's communications with

Accepted Answer

A)   Caleb and Delilah.
B)   Caleb only.
C)   Delilah only.
D)   neither Caleb nor Delilah.E) None of the above
F) A) and D) C

Question 12

Quibble 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 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

Accepted Answer

A)   liable because Roo & Slay owed a duty of care to Quibble.
B)   liable because Roo & Slay owed a duty to any foreseeable user.
C)   liable if Roo & Slay knew that Town would rely on the balance sheet.
D)   not liable because Roo & Slay and Town were not in privity.E) C) and D)
F) B) and D)

Question 13

Tony is an accountant whose clients include U-All Company. If Tony is negligent in his work for U-All, most courts would hold him liable to U-All and

Accepted Answer

A)   any third party.
B)   no third party.
C)   third parties who are foreseen users of the work.
D)   third parties who are reasonably foresee?able users of the work.E) All of the above
F) A) and D)

Question 14

Rollo is an attorney whose clients include Superior Company. If Rollo is negligent in his work for Superior, under the Restatement (Second)  of Torts, Rollo may be liable to Superior and

Accepted Answer

A)   any third party.
B)   no third party.
C)   third parties who are foreseen users of the work only.
D)   third parties who are reasonably foresee?able users of the work.E) None of the above
F) A) and B) C

Question 15

An attorney may be liable in negligence to any third party who the attorney knows will rely on the attorney's work.

Accepted Answer

A) True 
 B)False

Question 16

Dan and Eve are accountants who work together. Dan and Eve can limit their potential liability for each other's misconduct by organizing their business as

Accepted Answer

A)   a limited liability partnership only.
B)   a professional corporation only.
C)   either a limited liability partnership or a professional corporation.
D)   neither a limited liability partnership nor a professional corporation.E) A) and B)
F) A) and C)

Question 17

Longhaul, Inc., files a suit against Midge, 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, Longhaul must show that Midge

Accepted Answer

A)   acted with scienter.
B)   bought or sold a security.
C)   is incompetent.
D)   knows nothing about securities.E) B) and C)
F) A) and C)

Question 18

In a few states, communications between an accountant and his or her client are privileged.

Accepted Answer

A) True 
 B)False

Question 19

An accountant is not liable for a misstatement to a purchaser of securities who knew of the misstatement but invested anyway.

Accepted Answer

A) True 
 B)False

Question 20

The liability of professionals is based solely on common law.

Accepted Answer

A) True 
 B)False

Exam 51: Professional Liaility and Accountability

A professional whose client justifiably relies on the professional's mis?statement may be liable for constructive fraud.

Correct Answer
verified
False

Tom is an attorney. Tom's conduct is governed by rules of professional conduct established by the state in which he is licensed, and the Code of Professional Responsibility and Model Rules of Professional Conduct drafted by

Correct Answer
verified

Jim, an attorney, allows a statute of limitations to lapse on a claim by Midwest Manufacturing Company, a client. Jim

Correct Answer
verified

An accountant who prepares a financial state?ment in good faith may avoid liability under Section 18 of the Securities Ex?change Act.

Correct Answer
verified

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

Correct Answer
verified

Each state establishes rules that govern the conduct of attorneys

Correct Answer
verified

Rex, an accountant, enters into a contract to provide services to Sofi. Rex does not finish the work within the contract's deadline. Sofi pays a penalty for the missed deadline and hires Trey to complete the job. Rex is most likely liable for

Correct Answer
verified

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

Correct Answer
verified

Lee, an accountant, is subject to the ac?counting conventions, rules, and procedures that constitute generally ac?cepted accounting principles (GAAP) . GAAP are determined by

Correct Answer
verified

Under state rules of professional misconduct, an attorney should not engage in conduct involving "dishonesty."

Correct Answer
verified

Bryce's accountant is Caleb and his attorney is Delilah. All states protect, as privileged information, Bryce's communications with

Correct Answer
verified
C

Correct Answer
verified

Tony is an accountant whose clients include U-All Company. If Tony is negligent in his work for U-All, most courts would hold him liable to U-All and

Correct Answer
verified

Rollo is an attorney whose clients include Superior Company. If Rollo is negligent in his work for Superior, under the Restatement (Second) of Torts, Rollo may be liable to Superior and

Correct Answer
verified
C

An attorney may be liable in negligence to any third party who the attorney knows will rely on the attorney's work.

Correct Answer
verified

Dan and Eve are accountants who work together. Dan and Eve can limit their potential liability for each other's misconduct by organizing their business as

Correct Answer
verified

Longhaul, Inc., files a suit against Midge, 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, Longhaul must show that Midge

Correct Answer
verified

In a few states, communications between an accountant and his or her client are privileged.

Correct Answer
verified

An accountant is not liable for a misstatement to a purchaser of securities who knew of the misstatement but invested anyway.

Correct Answer
verified

The liability of professionals is based solely on common law.

Correct Answer
verified

Exam 51: Professional Liaility and Accountability

A professional whose client justifiably relies on the professional's mis?statement may be liable for constructive fraud.

Correct AnswerverifiedFalse

Tom is an attorney. Tom's conduct is governed by rules of professional conduct established by the state in which he is licensed, and the Code of Professional Responsibility and Model Rules of Professional Conduct drafted by

Correct AnswerverifiedShow Answer

Jim, an attorney, allows a statute of limitations to lapse on a claim by Midwest Manufacturing Company, a client. Jim

Correct AnswerverifiedShow Answer

An accountant who prepares a financial state?ment in good faith may avoid liability under Section 18 of the Securities Ex?change Act.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Each state establishes rules that govern the conduct of attorneys

Correct AnswerverifiedShow Answer

Rex, an accountant, enters into a contract to provide services to Sofi. Rex does not finish the work within the contract's deadline. Sofi pays a penalty for the missed deadline and hires Trey to complete the job. Rex is most likely liable for

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Lee, an accountant, is subject to the ac?counting conventions, rules, and procedures that constitute generally ac?cepted accounting principles (GAAP) . GAAP are determined by

Correct AnswerverifiedShow Answer

Under state rules of professional misconduct, an attorney should not engage in conduct involving "dishonesty."

Correct AnswerverifiedShow Answer

Bryce's accountant is Caleb and his attorney is Delilah. All states protect, as privileged information, Bryce's communications with

Correct AnswerverifiedC

Correct AnswerverifiedShow Answer

Tony is an accountant whose clients include U-All Company. If Tony is negligent in his work for U-All, most courts would hold him liable to U-All and

Correct AnswerverifiedShow Answer

Rollo is an attorney whose clients include Superior Company. If Rollo is negligent in his work for Superior, under the Restatement (Second) of Torts, Rollo may be liable to Superior and

Correct AnswerverifiedC

An attorney may be liable in negligence to any third party who the attorney knows will rely on the attorney's work.

Correct AnswerverifiedShow Answer

Dan and Eve are accountants who work together. Dan and Eve can limit their potential liability for each other's misconduct by organizing their business as

Correct AnswerverifiedShow Answer

Longhaul, Inc., files a suit against Midge, 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, Longhaul must show that Midge

Correct AnswerverifiedShow Answer

In a few states, communications between an accountant and his or her client are privileged.

Correct AnswerverifiedShow Answer

An accountant is not liable for a misstatement to a purchaser of securities who knew of the misstatement but invested anyway.

Correct AnswerverifiedShow Answer

The liability of professionals is based solely on common law.

Correct AnswerverifiedShow Answer

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False

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C

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C

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