Question 1

What was the traditional position of the courts to deny the claims of third parties based on?

Accepted Answer

The traditional position of the courts to deny the claims of third parties was based on a policy to protect the economic viability of the professions. This approach was taken to ensure that professionals could perform their duties without the fear of excessive liability, which could potentially harm their economic standing and the overall provision of professional services.

Question 2

George is a lawyer who provides legal services "in house" for a manufacturing company.Which of the following statements is correct regarding this arrangement?

Accepted Answer

George, as an in-house lawyer, acts as a fiduciary to his employer, meaning he has a legal obligation to act in the best interest of his employer.

Question 3

In what way are losses resulting from damage to property and pure economic losses similar with respect to professional liabilities arising in tort?

Accepted Answer

B

Question 4

Dr.Walton,a practising psychologist,prepared a report for litigation purposes,as requested by Hayley's lawyer.Hayley has been receiving disability benefits,which the insurer would like to terminate if it can prove she has recovered sufficiently.The insurance company has written to Dr.Walton,requesting a copy of the report prepared for Hayley's lawyer.What will most likely be the appropriate response?

Accepted Answer

The report is subject to professional-client privilege, meaning it cannot be shared without the client's consent, especially in a legal context where the information was prepared for litigation purposes.

Question 5

Following his accounting firm's audit team being hired by Canuck Inc.to review Northern Ltd.'s books,Tysan contacted several members he knew in the profession,advising them to buy Northern's shares.Trading in Northern's stock notably increased in ensuing weeks,driving the share price up,making it more expensive for Canuck to complete the takeover and prompting the securities commission to investigate.What did the securities commission find with respect to Tysan?

Accepted Answer

Tysan breached the fiduciary duty to maintain confidentiality of client information by advising others to buy shares based on non-public, privileged information obtained through his firm's audit work.

Question 6

Which of the following is NOT a typical function fulfilled by professional self regulatory bodies?

Accepted Answer

Professional self-regulatory bodies typically focus on setting standards for admission, managing indemnification and assurance funds, and disciplining members. Community service, while encouraged and often part of a professional's ethical obligations, is not a primary function of these bodies.

Question 7

A banker was asked for an opinion about the creditworthiness of a customer.He provided an opinion describing the customer as a poor credit risk without securing the customer's consent.Which of the following is most likely to result?

Accepted Answer

A claim for breach of professional fiduciary duty is most likely because the banker's action could be seen as a violation of the trust and confidentiality inherent in the banker-client relationship.

Question 8

In what way are professionals similar to one another?

Accepted Answer

Professionals are distinct in having ethical obligations and often being members of professional governing bodies, which set them apart from other employees and service providers. This includes adherence to specific codes of conduct and ethical standards relevant to their profession.

Question 9

In the case of Deloitte & Touche v Livent Inc (Receiver of)(Livent),how did the court limit the liability of auditors for errors in audited financial statements?

Accepted Answer

The court in Deloitte & Touche v Livent Inc (Receiver of) limited the auditor's liability to the specific purpose for which the auditors were engaged, thereby not extending liability universally to all potential users of the audited financial statements.

Question 10

A professional service contract should provide for unseen developments during the course of the contract.In so doing,which of the following questions will be addressed?

Accepted Answer

Allocating risk addresses unforeseen developments by determining how unexpected issues or costs will be managed between the parties involved in the contract.

Question 11

Accountants owe a fiduciary duty to their clients based on elements of trust and confidence.Which of the following would also be strongly supported by an accountant's fiduciary duty?

Accepted Answer

The answer of Accountants owe a fiduciary duty to their...

Question 12

A lawyer met with several members of the community at a social function.During the evening,he spent a great deal of time discussing one particular client in great detail.The client's friend,unknown to the lawyer,was not impressed by some of the derogatory comments expressed during the discussion.What will likely be the result when the client's friend explains the evening's events?

Accepted Answer

The lawyer's discussion of a client's details in a public setting breaches client confidentiality, which is a fundamental ethical obligation in the legal profession. This could lead to a complaint to the Law Society or equivalent regulatory body.

Question 13

Peabody and Company,a law firm,prepared a will for a client who has since passed away.Unfortunately,the firm was careless in preparing the will,and two individuals who were inadvertently left out of the will now wish to sue the firm.Which of the following describes the possible basis for this lawsuit?

Accepted Answer

Professional negligence, also known as legal malpractice, occurs when a lawyer fails to perform their legal duties competently, leading to harm. In this case, the law firm's carelessness in preparing the will could be considered professional negligence.

Question 14

What distinguishes professionals from other workers and service providers?

Accepted Answer

Professionals are distinguished by a special relationship of trust and loyalty with their clients, which is fundamental to professions such as law, medicine, and accounting, where clients rely heavily on the expertise and integrity of the professionals.

Question 15

Valdyn,Jacob,and Bob have just finished a review of their business's legal expenses for the past year.While there has been an increase,it hasn't been substantial enough to warrant changing their ad hoc retainer relationships with either Sheps & Shaps LLP or Dunn & Wright LLP.What is the meaning of "ad hoc" in this instance?

Accepted Answer

"Ad hoc" in this context means the firms are hired for specific projects or needs as they arise, rather than being on a permanent or long-term retainer.

Question 16

Pym and Pike is a law firm that is considering forming an LLP.Which of the following statements correctly describes the key advantage to Pym and Pike's partners of forming an LLP?

Accepted Answer

The answer of Pym and Pike is a law firm...

Question 17

With which of the following is the phrase "in an indeterminate amount for an indeterminate time to an indeterminate class" synonymous with respect to the application of the law to professional relationships?

Accepted Answer

The phrase "in an indeterminate amount for an indeterminate time to an indeterminate class" is synonymous with third party negligence liability. This concept refers to the idea that a professional could be held liable for negligence to a third party (not directly involved in the contractual relationship) for an unspecified amount of damages, over an undefined period, and to a broad class of individuals who were not direct parties to the professional's services.

Question 18

Sheps & Shaps LLP provides legal services by preparing contracts for an architectural firm on a regular basis.Which of the following best describes the nature of Sheps & Shaps' duties under this arrangement?

Accepted Answer

The answer of Sheps & Shaps LLP provides legal services...

Question 19

Why must an auditor act independently of any interest of the company that has retained him or her to perform the audit?

Accepted Answer

An auditor must act independently to ensure the audit's integrity and reliability, fulfilling a public function by providing an unbiased and objective assessment of the company's financial statements for the benefit of stakeholders and the public.

Question 20

Which of the following is synonymous with a "retainer" with regard to professional services?

Accepted Answer

A retainer in the context of professional services often refers to an advance payment made by a client to a professional, such as a lawyer, as a way to secure their services and cover initial expenses. This payment is typically made before any work begins.

Quiz 22: Professional Services