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Q:
Congress cannot impose any restrictions on exports except taxes.
Q:
Tariffs are imposed only on exports.
Q:
All nations have restrictions on imports.
Q:
Restrictions on exports may include quotas.
Q:
Restrictions on imports may include tariffs.
Q:
Expropriation, even with the payment of just compensation, violates generally observed principles of international law.
Q:
Many countries guarantee compensation to foreign investors if their property is confiscated.
Q:
A party to a licensing agreement generally agrees to pay royalties on some basis.
Q:
The simplest way for a U.S. firm to do business in a foreign market is to export its products directly to that market.
Q:
A foreign state will not be immune from the jurisdiction of U.S. courts if the state is involved in commercial activity in the United States.
Q:
The doctrine of sovereign immunity can immunize a foreign nation from the jurisdiction of U.S. courts.
Q:
Firms overseas have almost total legal protection against government acts in the countries in which they operate, under the act of state doctrine.
Q:
Confiscation occurs when a government seizes a private property for a proper public purpose and awards just compensation.
Q:
Under the principle of comity, a foreign business that deals with a U.S. business may be subject to U.S. law.
Q:
The principle of comity is based primarily on courtesy and respect.
Q:
Under the principle of comity, foreign nations are exempt from the jurisdiction of U.S. courts.
Q:
International law is a body of law that governs relations among nations.
Q:
Frank is an accountant. Gail is an attorney. Which professional is most restricted from disclosing his or her client's communication?
Q:
Dora, a certified public accountant, provides accounting services to Eagle Corporation. The services include preparing Eagle's financial reports and issuing opinion letters based on the reports. In 2006, Eagle falls into serious financial trouble, but neither Dora's reports nor her opinion letters indicate this situation. Relying on Dora's portrayal of Eagle's financial situation, Eagle borrows a large sum of money to build a new shipping facility. In lending Eagle the money, First National Bank relies on Dora's opinion letter Dora is aware of this reliance. If Dora did not engage in intentional fraud but was negligent, what is her potential liability?
Q:
Adam's accountant is Burt and his attorney is Carla. All states protect, as privileged information, Adam's communications with
a. Burt only.
b. Carla only.
c. Burt and Carla.
d. none of the above.
Q:
Alice prepares tax returns for Big Stores, Inc., and other business firms. Under the Internal Revenue Code, Alice may be liable for
a. only negligent understatement of a client's tax liability.
b. only willful understatement of a client's tax liability.
c. negligent or willful understatement of a client's tax liability.
d. none of the above.
Q:
Lucy is an accountant who prepares her clients' tax returns. Mark 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
a. Lucy only.
b. Mark only.
c. Lucy and Mark.
d. none of the above.
Q:
Beth is an accountant with Consumer Sales Corporation. Dona buys Consumer stock and loses money on the investment. To recover from Beth under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission, Dona must prove
a. nothing.
b. scienter, fraud, and reliance only.
c. scienter, fraud, reliance, and materiality only.
d. scienter, fraud, reliance, materiality, and causation.
Q:
Maria, an accountant, includes a false statement in a report for National Products, Inc. (NPI) that is filed with the Securities and Exchange Commission. Omar buys stock in NPI and loses money on the investment. Omar files a suit against Maria, alleging fraud under the 1934 Securities Exchange Act. To avoid liability, Maria can show that
a. she intended to defraud NPI, not Omar.
b. she was not aware her statement was false.
c. either a or b.
d. none of the above.
Q:
Nina, an accountant, prepares for Opal Corporation a financial statement that misstates a material fact. The statement is included in Opal's registration statement. Pete, who is in privity with Nina, and Quinn, who is not, each buy Opal stock. Under Section 11 of the Securities Act of 1933, Nina may be liable to
a. neither Pete nor Quinn.
b. Pete and Quinn.
c. Pete only.
d. Quinn only.
Q:
Harry is an accountant whose clients include International Investments, Inc. For a violation of securities laws, Harry may be subject to
a. civil penalties only.
b. criminal penalties only.
c. civil and criminal penalties.
d. none of the above.
Q:
Mona, an accountant, prepares for NuTech Corporation a financial statement that omits a material fact. The financial statement is included in NuTech's registration statement, which Pam reads. Pam buys NuTech stock. Under Section 11 of the Securities Act of 1933, for Mona to be liable for the omission, Pam must show
a. only that Pam relied on the omission.
b. only that Pam suffered a loss on the stock.
c. that Pam relied on the omission and suffered a loss on the stock.
d. none of the above.
Q:
Phil is an accountant. Under the Sarbanes-Oxley Act of 2002, the degree of government oversight over the public accounting practices of Phil and other accountants was
a. decreased.
b. increased.
c. new.
d. unchanged.
Q:
Lara, an accountant, conducts an audit of Micro, Inc. After the conclusion of the audit, the working papers created in preparing the audit must be
a. disposed of immediately.
b. kept until the Public Company Accounting Oversight Board's review.
c. maintained for seven years.
d. retained forever.
Q:
Erin is an accountant whose clients include American Business Corporation (ABC). Under the Restatement (Second) of Torts, if Erin is negligent in her work for ABC, she could be liable to
a. ABC and any third party.
b. ABC and third parties who are foreseen users of her work for ABC.
c. ABC and third parties who are reasonably foreseeable users of her work for ABC.
d. ABC only.
Q:
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
a. any third party.
b. no third party.
c. third parties who are foreseen users of the work.
d. third parties who are reasonably foreseeable users of the work.
Q:
Doug is an accountant whose clients include Consumer Products, Inc. (CPI). According to the court in Ultramares Corp. v. Touche, if Doug is negligent in his work for CPI, he could be liable to
a. CPI and any third party.
b. CPI and third parties who are foreseen users of his work for CPI.
c. CPI and third parties who are reasonably foreseeable users of his work for CPI.
d. CPI only.
Q:
Delta Products, Inc., files a suit against Evan, its former accountant, alleging constructive fraud. Evan may be held liable
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.
Q:
Owen is an attorney. Paula is a certified public accountant. These professionals are subject to standards of conduct established by
a. codes of professional ethics only.
b. court decisions and state statutes only.
c. codes of professional ethics, court decisions, and state statutes.
d. none of the above.
Q:
Fact Pattern 51-1
Allen is Beta Corporation's accountant. On Allen's advice, Beta reports a certain transaction as a gain in its 2004 financial statements. The next year, Beta plans to make a public offering of its stock on April 1. The offering is delayed when the Securities and Exchange Commission concludes that Beta's 2004 statements are incorrect and requires them to be restated. The delay causes the stock to be sold when, due to unrelated factors, the price is lower than it is on April 1.Refer to Fact Pattern 51-1. Under the reasoning of the court in Case 51.1, Oregon Steel Mills, Inc. v. Coopers & Lybrand, LLP, the "harm-producing force" is
a. Allen's offering his advice to Beta.
b. Beta's applying Allen's advice to its financial statements.
c. Beta's making the public offering despite the delay.
d. the action of market forces on the price of Beta's stock.
Q:
Fact Pattern 51-1
Allen is Beta Corporation's accountant. On Allen's advice, Beta reports a certain transaction as a gain in its 2004 financial statements. The next year, Beta plans to make a public offering of its stock on April 1. The offering is delayed when the Securities and Exchange Commission concludes that Beta's 2004 statements are incorrect and requires them to be restated. The delay causes the stock to be sold when, due to unrelated factors, the price is lower than it is on April 1.Refer to Fact Pattern 51-1. Under the reasoning of the court in Case 51.1, Oregon Steel Mills, Inc. v. Coopers & Lybrand, LLP, Allen breached
a. his duty to Beta to protect Beta against fluctuations in its stock price.
b. his duty to Beta to provide competent accounting services.
c. his duty to Beta to reasonably foresee Beta's market losses.
d. no duty to Beta.
Q:
Ava is an accountant charged by Best Sales, Inc., a client, with negligence. Ava may successfully defend against the claim if she can show that
a. scienter was lacking.
b. she complied with all generally accepted accounting principles.
c. the negligence was not the proximate cause of the client's losses.
d. the negligence was only contributory.
Q:
Tim is an accountant. Tim's violation of generally accepted accounting principles and generally accepted auditing standards
a. does not indicate that Tom was negligent.
b. is prima facie evidence that Tom was negligent.
c. precludes Tom from raising any defense against a negligence claim.
d. will never subject Tom to liability.
Q:
Cody, an accountant, fails to perform a contract with Dion, who is sanctioned for Cody's failure to meet a certain deadline. At an added expense, Dion hires Elin to provide the contracted-for services. Cody may be liable to Dion for
a. nothing.
b. only the expense to hire Elin.
c. only the sanction for the missed deadline.
d. the expense and the sanction.
Q:
Aiding or assisting in the preparation of a false tax return is a felony.
Q:
Under the Securities Exchange Act of 1934, an accountant who fraudulently misstates a material fact is not liable if the misstatement is oral.
Q:
Under the Securities Exchange Act of 1934, an accountant who omits a material fact in a document filed with the Securities and Exchange Commission is not liable.
Q:
Accountants are not subject to criminal penalties for violations of federal securities laws.
Q:
Under the Securities Act of 1933, an accountant who misstates a material fact in a registration statement is not liable.
Q:
Under the Sarbanes-Oxley Act of 2002, an accountant must dispose of working papers on the conclusion of the audit to which the papers relate.
Q:
A public accounting firm is a firm engaged in the practice of accounting in the public interest.
Q:
Under the Restatement (Second) of Torts, accountants cannot be held liable for negligence to any third parties.
Q:
In most courts, accountants can be liable for negligence to any known users of the accountants' financial reports.
Q:
Traditionally, a professional did not owe any duty to a third person with whom the professional had no direct contractual relationship.
Q:
Privity of contract is the relationship that exists between the promisor or promisee of a contract and a third party.
Q:
Professionals can limit their liability for the misconduct of other professionals with whom they work.
Q:
A professional may be liable for fraud despite a lack of fraudulent intent.
Q:
An attorney who fails to discover law that can be found through a reasonable amount of research may be liable to a client to whom that law applies.
Q:
An accountant can avoid liability by proving that his or her negligence was not the proximate cause of the client's loss.
Q:
The standard of care required of an accountant is based on generally accepted accounting principles and generally accepted auditing standards.
Q:
An accountant may never use the defense of contributory negligence.
Q:
A professional is not liable for a breach of any duty that is not set out in a written contract.
Q:
A professional owes a duty to his or her client to honor the terms of their contract.
Q:
At common law, professionals may be liable to clients for negligence.
Q:
Ann, an accountant, prepares a tax return for a client, Beta Sales Company. Carl, who is not an accountant, prepares a tax return for Dina's business, Delta Services. Can an accountant who prepares a tax return for a client be liable for any false statements in the return? Can a person who is not an accountant and who prepares a tax return for someone else be held liable for any false statements in the return?
Q:
Alan, a certified public accountant, prepares and certifies Commercial Products Corporation's financial statements. These statements are included in Commercial's registration statement filed with the Securities and Exchange Commission before Commercial's offering of securities. Donna buys a security covered by the registration statement. Based on this transaction, Donna files a suit against Alan under Section 11 and Section 10(b) of the Securities Exchange Act of 1934. To succeed in the suit, what must Donna prove? Alan responds that Donna was not in privity with him and that even if she had been in privity, she cannot prove his lack of due diligence. Can Alan prevail on these grounds? Why or why not?
Q:
Jill is an attorney, whose clients include Midstate Trucking Company. The contents of Jill's file on Midstate may be disclosed to someone other than Midstate
a. only to a third party who is a foreseeable user of the information.
b. only under a court order (with or without Midstate's consent).
c. only with Midstate's consent.
d. under any circumstances.
Q:
Ally, an accountant, helps Business Company, Inc., prepare a false tax return. Under the Internal Revenue Code, Ally may be subject to
a. a felony punishable by a fine and imprisonment.
b. a felony punishable only by a fine.
c. a misdemeanor punishable only by a fine.
d. no penalties.
Q:
Sandy, an accountant, may be subject to criminal sanctions for violations of
a. not the Securities Act of 1933 or the Securities Exchange Act of 1934.
b. the Securities Act of 1933 and the Securities Exchange Act of 1934.
c. the Securities Act of 1933 only.
d. the Securities Exchange Act of 1934 only.
Q:
Elle sells securities to Floyd. Section 18 of the Securities Exchange Act of 1934 applies to
a. Elle and Floyd.
b. Elle only.
c. Floyd only.
d. neither Elle nor Floyd.
Q:
Alpha, Inc., files a suit against Bill, 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, Alpha must show
a. neither that Alpha bought or sold a security nor that Bill acted with scienter.
b. only that Alpha bought or sold a security.
c. only that Bill acted with scienter.
d. that Alpha bought or sold a security and Bill acted with scienter.
Q:
Pat, an accountant, includes a false statement in a report for Quantity, Inc., that is filed with the Securities and Exchange Commission. 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 Exchange Act of 1934, liability may attach to
a. Pat's report.
b. Quantity's ad.
c. Rita's call.
d. Stan's purchase.
Q:
Amy, an accountant, accumulates working papers while performing an audit for Beta Company. After the audit, these documents belong to
a. Amy, with Beta having a right of access to the papers.
b. Beta, with Amy having a right of access to the papers.
c. neither Amy nor Betathe papers must be disposed of.
d. the Public Company Accounting Oversight Board.
Q:
Carl is an accountant whose clients include Digital Software Corporation. Working papers that Carl creates when preparing financial reports for Digital Software are owned by
a. Carl only.
b. Digital Software only.
c. Carl and Digital Software jointly.
d. neither Carl nor Digital Software.
Q:
Under the Sarbanes-Oxley Act of 2002, an organization "engaged in the practice of public accounting or preparing or issuing audit reports" is
a. a public accounting firm.
b. Sarbanes Oxley.
c. the Public Company Accounting Oversight Board.
d. the Securities and Exchange Commission.
Q:
Jeff, an accountant, prepares for Kappa Corporation a financial statement that omits a material fact. The statement is included in Kappa's registration statement. Liam, who reads the statement, and Myra, who does not, each buy Kappa stock. Under Section 11 of the Securities Act of 1933, Jeff may be liable to
a. Liam and Myra.
b. Liam only.
c. Myra only.
d. neither Liam nor Myra.
Q:
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
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 foreseeable users of the work.
Q:
Aisha is an accountant whose clients include Best Purchasing, Inc., (FSC). The leading case for the traditional view that if Aisha is negligent in her work for Best, she should be held liable only to Best is
a. Bily v. Arthur Young & Co.
b. Credit Alliance Corp. v. Arthur Andersen & Co.
c. Raritan River Steel Co. v. Cherry, Bekaert & Holland.
d. Ultramares Corp. v. Touche.
Q:
Regional Distribution, Inc., files a suit against Sam, its former accountant, alleging actual fraud. Regional must prove
a. an intent to deceive only.
b. detrimental reliance only.
c. an intent to deceive and detrimental reliance.
d. none of the above.
Q:
Jim, an attorney, allows a statute of limitations to lapse on a claim by Midwest Manufacturing Company, a client. Jim
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.
Q:
National Business Systems Corporation (NBS) files a suit against Mike, its former accountant, alleging constructive fraud. NBS need not prove
a. detrimental reliance.
b. intent to deceive.
c. justifiable reliance.
d. materiality.
Q:
Bob, an accountant, intentionally misstates a material fact to mislead Consolidated Industries, Inc., a client. Consolidated justifiably relies on the misstatement to its detriment. Bob may be liable for
a. actual fraud only.
b. constructive fraud only.
c. actual fraud or constructive fraud.
d. none of the above.
Q:
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
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.
Q:
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
a. federal courts.
b. the American Bar Association.
c. the American Institute of Certified Public Accountants.
d. the Financial Accounting Standards Board.
Q:
Lee, an accountant, is subject to the accounting conventions, rules, and procedures that constitute generally accepted accounting principles (GAAP). GAAP are determined by
a. state courts.
b. the American Bar Association.
c. the American Institute of Certified Public Accountants.
d. the Financial Accounting Standards Board.