Question 1

Kiana 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​

Accepted Answer

A)   ​any individual.
B)   ​an accountant.
C)   ​an attorney.
D)   ​a tax preparer.E) A) and B)
F) A) and C)

Question 2

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) C) and D)
F) A) and B)

Question 3

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) None of the above
F) B) and D)

Question 4

Attorneys are required to find relevant law that is applicable to a case and can be discovered through a reasonable amount of research.

Accepted Answer

A) True 
 B)False

Question 5

An accountant is required to discover every impropriety, defalcation, and fraud in a client's books.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)   ​Hadley, with Ilene having a right of access to the papers.
B)   ​Ilene, with Hadley having a right of access to the papers.
C)   ​neither Hadley nor Ilene-the papers must be disposed of.
D)   ​the Public Company Accounting Oversight Board.E) B) and D)
F) B) and C)

Question 7

To obtain damages for fraud, an innocent party does not need to have been injured.

Accepted Answer

A) True 
 B)False

Question 8

Reed prepares federal corporate income tax returns for Shopping Malls, Inc., and other firms. Under the Internal Revenue Code, with respect to an understatement of a client's tax liability, Reed may be liable for​

Accepted Answer

A)   ​negligent or willful misconduct.
B)   ​no misconduct.
C)   ​only negligent misconduct.
D)   ​only willful misconduct.E) A) and C)
F) None of the above A

Question 9

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

Accepted Answer

A)   ​actual fraud.
B)   ​constructive fraud.
C)   ​destructive fraud.
D)   ​virtual fraud.E) A) and B)
F) A) and C)

Question 10

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​

Accepted Answer

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) A) and B)
F) A) and C)

Question 11

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  True

Question 12

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

Question 13

In some states, in the absence of privity, a party cannot recover from an accountant for negligence.

Accepted Answer

A) True 
 B)False

Question 14

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  False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

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

Question 19

The Sarbanes-Oxley Act applies only to domestic public accounting firms that provide auditing services to "issuers."​

Accepted Answer

A) True 
 B)False

Question 20

A professional can be liable for constructive fraud only if he or she acted with fraudulent intent.

Accepted Answer

A) True 
 B)False

Exam 22: Professional Liability and Accountability

Kiana 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​

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 AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Attorneys are required to find relevant law that is applicable to a case and can be discovered through a reasonable amount of research.

Correct AnswerverifiedShow Answer

An accountant is required to discover every impropriety, defalcation, and fraud in a client's books.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

To obtain damages for fraud, an innocent party does not need to have been injured.

Correct AnswerverifiedShow Answer

Reed prepares federal corporate income tax returns for Shopping Malls, Inc., and other firms. Under the Internal Revenue Code, with respect to an understatement of a client's tax liability, Reed may be liable for​

Correct AnswerverifiedA

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

Correct AnswerverifiedShow Answer

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​

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 AnswerverifiedTrue

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

In some states, in the absence of privity, a party cannot recover from an accountant for negligence.

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 AnswerverifiedFalse

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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

The Sarbanes-Oxley Act applies only to domestic public accounting firms that provide auditing services to "issuers."​

Correct AnswerverifiedShow Answer

A professional can be liable for constructive fraud only if he or she acted with fraudulent intent.

Correct AnswerverifiedShow Answer

Kiana 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

Correct Answer
verified

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

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

Correct Answer
verified

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

Correct Answer
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Correct Answer
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Reed prepares federal corporate income tax returns for Shopping Malls, Inc., and other firms. Under the Internal Revenue Code, with respect to an understatement of a client's tax liability, Reed may be liable for

Correct Answer
verified
A

Ezra, an accountant, intentionally misstates a material fact to mislead Fruit Packing, Inc., a client. Fruit Packing justifiably relies on the misstatement to its detriment. Ezra is most likely liable for

Correct Answer
verified

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

Correct Answer
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Correct Answer
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True

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
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Correct Answer
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Correct Answer
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False

Correct Answer
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Correct Answer
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Correct Answer
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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

The Sarbanes-Oxley Act applies only to domestic public accounting firms that provide auditing services to "issuers."

Correct Answer
verified

Correct Answer
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