Question 1

Bertha is an accountant with Chocolate Shoppes Corporation.Doral buys Chocolate stock and loses money on the investment.To recover from Bertha under Section 10(b)of the Securities Exchange Act of 1934 and Rule 10b-5 of the Se?curities and Exchange Commission,Doral must prove

Accepted Answer

To recover under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission, Doral must prove scienter (intent to deceive), fraud (material misrepresentation or omission), reliance, materiality (information that would have affected a reasonable investor's decision), and causation (that the misrepresentation or omission caused the loss).

Question 2

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

Accepted Answer

Under the Internal Revenue Code, a tax practitioner such as Feder may be liable for an understatement of a client's tax liability due to negligence, reckless or intentional disregard of rules or regulations, or willful misconduct. Therefore, choice A is the best answer as it includes both negligent and willful misconduct as potential grounds for liability.

Question 3

Flynn,an accountant,helps Grange Supply Company prepare and file a false federal corporate income tax return.Under the In?ternal Revenue Code,this is

Accepted Answer

Under the Internal Revenue Code, preparing and filing a false federal corporate income tax return is considered a felony punishable by a fine and imprisonment. Therefore, choice A is the correct answer. Choices B, C, and D are incorrect as they do not accurately reflect the severity of the crime or the consequences set forth in the Internal Revenue Code.

Question 4

Longhaul Trucking,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 in recovering damages,Longhaul must show that Midge

Accepted Answer

In order to recover damages under the antifraud provisions of the Securities Exchange Act of 1934 and Rule 10b-5, Longhaul must show that Midge acted with scienter, which means that she knowingly or recklessly made a false statement or omitted a material fact in connection with the purchase or sale of a security. Buying or selling a security is not relevant to this particular claim, and Midge's competence or knowledge about securities is also not the issue.

Question 5

Lacy is an accountant who prepares her clients' tax returns.Muff is not an accountant,but he also prepares tax returns for clients.Under the In?ternal Revenue Code,liability for preparing a false return may be im?posed on

Accepted Answer

The Internal Revenue Code imposes liability for preparing a false return on both Lacy, who is a licensed accountant, and Muff, who is not licensed. Both professionals are responsible for ensuring the accuracy of the information on their clients' tax returns, and can be held responsible for any errors or misrepresentations.

Question 6

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

Accepted Answer

The answer of Bryce's accountant is Caleb and his attorney...

Question 7

Meri,an accountant,includes a false statement in a report for Novelty Paper Products,Inc.(NPPI)that is filed with the Securities and Exchange Com?mission.When Otho buys stock in NPPI and loses money on the investment,he files a suit against Meri,alleging fraud under the 1934 Securities Exchange Act.To avoid liability,Meri can show that she

Accepted Answer

To avoid liability for fraud under the 1934 Securities Exchange Act, Meri may be able to show that she was not aware her statement was false. This defense is known as lack of scienter or lack of intent to deceive. However, if it can be proven that Meri acted recklessly or with gross negligence in making the false statement, this defense may not be successful. Options A, B, and C are not valid defenses in this situation.

Question 8

Pace is an attorney,whose clients include Quikfeet Running Shoes Company.Unless Quikfeet has violated securities law,the contents of Pace's file on Quikfeet may be disclosed to someone other than Quikfeet

Accepted Answer

The answer of Pace is an attorney,whose clients include Quikfeet...

Question 9

Bowie,a certified public accountant,prepares and certifies Candy Products Corporation's financial statements.These statements are in?cluded in Candy's registration statement filed with the Securities and Exchange Commission before Candy's offering of securities.Dona buys a security covered by the registration statement.Based on this transaction,Dona files a suit against Bowie under Section 11 of the Securities Act of 1933 and Section 10(b)of the Securities Exchange Act of 1934.To succeed in the suit,what must Dona prove? Bowie responds that Dona was not in priv?ity with him and that even if she had been in privity,she cannot prove his lack of due diligence.Can Bowie prevail on these grounds? Why or why not?

Accepted Answer

The answer of Bowie,a certified public accountant,prepares and certifies Candy...

Question 10

Jerzy is an accountant whose clients include Kopper Kettle Restaurants,Inc.For a violation of securities laws,Jerzy may be subject to

Accepted Answer

Jerzy may be subject to criminal liability if he violated securities laws. This would involve facing criminal charges and potentially serving time in prison if found guilty. Comprehensive liability and corporate liability are not applicable in this scenario, and there may be some level of civil liability depending on the specifics of the violation. No liability is not possible if Jerzy did in fact violate securities laws.

Question 11

Dominique,a certified public accountant,provides accounting serv?ices to Eagle Corporation.The services include preparing Eagle's financial re?ports and issuing opinion letters based on the reports.In 2008,Eagle falls into serious financial trouble,but neither Dominique's reports nor her opinion let?ters indicate this situation.Relying on Dominique's portrayal of Eagle's finan?cial situation,Eagle borrows a large sum of money to build a new ship?ping facility.In lending Eagle the money,First National Bank relies on Dominique's opinion letter.Dominique is aware of this reliance.If Dominique did not en?gage in intentional fraud but was negligent,what is her potential liability?

Accepted Answer

The answer of Dominique,a certified public accountant,provides accounting serv?ices to...

Question 12

Pat,an accountant,includes a false statement in a report for Quantity Overstock,Inc. ,that is filed with the Securities and Exchange Commis?sion.Quantity publishes a misleading ad about its future prospects.Rita sees the ad and calls Stan,who buys stock in Quantity.Under Section 18 of the Securities Ex?change Act of 1934,liability may attach to

Accepted Answer

The answer of Pat,an accountant,includes a false statement in a...

Quiz 31: Liability of Accountants Other Professionals

Bertha is an accountant with Chocolate Shoppes Corporation.Doral buys Chocolate stock and loses money on the investment.To recover from Bertha under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the Se?curities and Exchange Commission,Doral must prove