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LEGL 4400 EXAM 2 questions and answers certified 2024
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LEGL 4400 EXAM 2 questions and answers certified 2024
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LEGL 4400 EXAM 2contract liability - correct answer ✔the employment contract between an
accountant and her client is subject to the general principles of contract law
explicit duties - correct answer ✔the accountant is bound to perform all the
duties she expressly agrees to provide
implicit duties - correct answer ✔the accountant impliedly agrees to perform
the contract in a competent and professional manner
beneficiaries - correct answer ✔contract liability extends to the client or
contracting party and to third-party beneficiaries (non contracting parties
intended by the contracting parties to receive the primary benefit under the
contract)
breach of contract - correct answer ✔general contract law principles apply
tort liability - correct answer ✔a private or civil wrong or injury other than a
breach of contract
negligence - correct answer ✔an accountant is liable for failing to exercise
the degree of care reasonably competent accountant would exercise under
the circumstances; most courts have extended an accountant's liability for
negligence beyond the client and third-party beneficiaries to foreseen third
parties
fraud - correct answer ✔an accountant who commits a fraudulent act is liable
for both compensatory and punitive damages to any person who he should
have reasonable foreseen would be injured; a fraudulent act is a false
,representation of fact that is material, is made with knowledge of its falsity and
with the intention to deceive, and is justifiably relied on
criminal liability - correct answer ✔states law imposes criminal liability on
accountants for willfully certifying false documents, altering or tampering with
accountants for willfully certifying false documents, altering or tampering with
accounting records, using false financial reports, giving false testimony, and
committing forgery
working papers - correct answer ✔an accountant is considered the owner of
his these but may not disclose their contents unless the client agrees or a
court orders the disclosure
accountant-client privilege - correct answer ✔not recognized generally by the
common law or federal law, although some states (not all) grant this
1933 Act Civil Liability - correct answer ✔section 11 imposes express civil
liability upon accountants if the financial statements they prepare or certify for
a registration statement contain any untrue statement or omit any material
fact, unless the accountant proves her due diligence defense, which requires
that the accountant had, after reasonable investigation, reasonable grounds to
believe and did believe that the financial statements were true, complete, and
accurate
1933 Act Criminal Liability - correct answer ✔a willful violator of section 11 is
subject to fines of not more than $10,000 and/or imprisonment of not more
than five years
1934 Act Section 18 - correct answer ✔imposes express civil liability on an
accountant who knowingly makes any false or misleading statement about
any material fact in any report, document, or registration filed with the SEC
, 1934 Act Rule 10b-5 - correct answer ✔an accountant is civilly liable under
this rule if he acts with scienter in making oral or written misstatements or
omissions of material fact in connection with the purchase or sale of a security
1934 Act Criminal Liability - correct answer ✔a willful violator of either
Section 18 or Rule 10b-5 is subject to fines of not more than $5 million and/or
imprisonment of not more than twenty years
1935 audit requirements - correct answer ✔auditors must establish
procedures capable of detecting material illegal acts, identifying material
related to party transactions, and evaluating whether there is substantial doubt
about the issuer's ability to continue as a going concern during the next fiscal
year
Sarbanes-Oxley Act - correct answer ✔establishes a new regulatory body to
oversee public company auditors, makes auditors more independent from
their clients, and places direct responsibility for the audit relationship on audit
committees
secured transaction - correct answer ✔an agreement by which one party
obtains a security interest in the personal property of another to secure the
payment of a debt
debtor - correct answer ✔person who has an interest in the collateral other
than a security interest; typically is the person obligated on the debt secured
by the security interest
secured party - correct answer ✔person in whose favor a security interest in
the collateral is created or provided for under the security agreement
collateral - correct answer ✔property subject to a security interest
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