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Law
Q:
Lebron, an attorney, allows a statute of limitations to lapse on a claim by Midwest Metal Fabrication Company, a client. Lebron
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:
Gina, a minor, signs a contract to buy a car from Hi-Valu Motors by misrepresenting her age as twenty-one. Gina fails to make the payments. Hi-Valu sues. In most states, Gina can
a. not return the car nor avoid further liability.
b. not return the car but can avoid further liability.
c. return the car and avoid further liability.
d. return the car but cannot avoid further liability.
Q:
Property voluntarily placed somewhere by its owner and inadvertently forgotten is lost property.
Q:
Dwayne 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
a. a client.
b. an accountant.
c. an attorney.
d. a tax preparer.
Q:
Gina, a minor, enters into a contract to buy a tractor from Herb, an adult. If the deal is set aside, restoring Gina and Herb to their original positions prior to a contract is
a. ratification.
b. emancipation.
c. disaffirmance.
d. restitution.
Q:
If confusion occurs as a result of the act of a third party, that third party acquires ownership rights in proportion to the amount confused.
Q:
Yves is an accountant charged with negliÂgence by Zesty Soup Company, a client. Yves may successfully defend against the claim if he can show that
a. scienter was lacking.
b. he complied with all International Financial Reporting Standards.
c. the negligence was not the proximate cause of the client's losses.
d. the negligence was only contributory.
Q:
On Tad's eighteenth birthday, he decides that he no longer wants to keep a car he bought from U-Pick Autos, Inc., when he was seventeen. His right to disaffirm the deal will depend on
a. the car's condition when Tad bought it.
b. the car's current condition.
c. whether Tad acts within a reasonable period of time.
d. whether U-Pick has the right to disaffirm.
Q:
Pluto accuses Quark, an accountant, of committing defalcation. This is
a. embezzlement.
b. general misconduct.
c. professional negligence.
d. throwing something out of a window.
Q:
A person acquires title to fungible goods by mixing them.
Q:
Nora signs a contract to buy a car just before reaching the age of majority. After reaching the age of majority, Nora does not take possession or make payments. Most courts would hold that she had
a. disaffirmed the contract.
b. executed the contract.
c. ratified the contract.
d. rescinded the contract.
Q:
Gert, an accountant, contracts to conduct an audit for Hailey. In performing the audit, Gert fails to detect certain misconduct. Gert is most likely
a. liable if a normal audit would have revealed the misconduct.
b. liable if Gert issues a specifically qualified opinion.
c. not liable if Gert generally disclaims any liability.
d. not liable if the misconduct was due to Hailey's negligence.
Q:
A gift causa mortis is effective only if the donor dies and the donee lives.
Q:
Sue, a minor, signs a contract to buy a computer from Tom, the owner of United Computer Store. Sue's right to disaffirm the contract
a. does not change the fact that Tom is bound by the contract.
b. does not yet exist because Sue is still a minor.
c. gives Tom, an adult, the right to disaffirm the contract.
d. is not valid because a computer is a "necessary."
Q:
A gift to a dying donee is a gift causa mortis.
Q:
Estes, an accountant, contracts to perform services for Frasier. In performing those services, Estes uncovers a suspicious financial transaction. Estes is most likely not liable if he
a. acted negligently in failing to discover the transaction sooner.
b. conceals the discovery and otherwise finishes the work.
c. investigates and reports the discovery to Frasier.
d. obtains restitution from the perpetrator without Frasier's knowledge.
Q:
Jaime, an accountant, contracts to perform services for Kase. Jaime acts in good faith and conforms to generally accepted accounting principles, but makes a mistake in judgment. Jaime is most likely
a. liable if Jaime failed to discover a defalcation.
b. liable if Jaime failed to discover a fraud.
c. liable if Jaime failed to discover an impropriety.
d. not liable.
Q:
Delivery of intangible personal property must be done by constructive delivery.
Q:
Chris, a minor, signs a contract to purchase alcoholic beverages for Dine & Drink, his parents' restaurant. The contract is
a. valid but may be disaffirmed.
b. valid but may not be disaffirmed.
c. void as a matter of law.
d. void unless it is also signed by Ed, the manager of Dine & Drink.
Q:
Tiny is an accountant. Tiny's violation of generally accepted accounting principles and generally accepted auditing standards
a. does not indicate that Tiny was negligent.
b. is prima facie evidence that Tiny was negligent.
c. precludes Tiny from raising any defense against a negligence claim.
d. will never subject Tiny to liability.
Q:
Don enters into a contract with Edie, who does not have contractual capacity. The law will permit Don to enforce the contract only if Edie
a. elects not to avoid the contract.
b. is a minor.
c. is a minor, intoxicated, or mentally incompetent.
d. is intoxicated or mentally incompetent.
Q:
A promise to deliver a gift is constructive delivery.
Q:
Leslie, an accountant, enters into a contract to provide services to Marty. Leslie does not finish the work within the contract's deadline. Leslie is
a. liable for breach of contract.
b. not liable, because Leslie is a professional.
c. not liable, because Leslie's failure must have been Marty"˜s fault.
d. not liable, because the work took longer than foreseen.
Q:
Rex, an accountant, enters into a contract to provide services to Sofi. Rex does not finish the work within the contract's deadline. Sofi pays a penalty as a result of the missed deadline and hires Trey to complete the job. Rex is most likely liable for
a. nothing.
b. Sofi's penalty and the cost to hire Trey.
c. Sofi's penalty only.
d. the cost to hire Trey only.
Q:
Constructive delivery occurs when property is physically transferred.
Q:
When a statute protects a certain class of people, a member of that class cannot enforce an otherwise illegal contract.
Q:
Lucille, an accountant, is subject to the acÂcounting conventions, rules, and procedures that constitute generally acÂcepted accounting principles (GAAP). GAAP are determined by
a. the International Accounting Standards Board.
b. the American Bar Association.
c. the American Institute of Certified Public Accountants.
d. the Financial Accounting Standards Board.
Q:
A gift is effective whether or not it is accepted.
Q:
If an illegal contract is executory, either party can enforce it.
Q:
In no states are communications between an accountant and his or her client privileged.
Q:
One way to acquire ownership rights to property is merely to possess it.
Q:
An exculpatory clause in an employment contract is always enforceable.
Q:
A contract in which the stronger party dictates the terms is an adhesion contract.
Q:
Penalties for aiding or assisting in the preparation of false tax returns are limited to one penalty per taxpayer per tax year.
Q:
The most common way to acquire personal property is to "capture" it.
Q:
Property used by a government for a public purpose such as a park is community property.
Q:
A covenant not to compete that is part of an employment contract will generally be struck down.
Q:
Accountants may be subject to criminal penalties for violations of federal securities laws.
Q:
Chris promises Dina $40,000 if she graduates from Eagle College. Dina enrolls in Eagle, attends full-time for four years, and graduates. When Dina asks Chris for $40,000, Chris says, "I don"t remember promising you $40,000. But if there was a promise, it's not enforceable, because we didn"t bargain for it. And even if there was a promise that would otherwise be enforceable, I revoke it now." Can Dina enforce Chris's "promise"? Why or why not?
Q:
If property is owned as community property, each spouse owns an undivided one-half interest in it.
Q:
A tax preparer that fails to give a taxpayer a copy of his or her tax return may be subject to a penalty under the Internal Revenue Code.
Q:
In May, Alex agrees to work for Beta Sales Company at $800 per week for a year beginning June The following January, Competitive Merchandising, Inc., offers Alex the same work at $900 per week. Alex tells Beta about the offer. Beta offers to enter into a new contract with Alex at $875 per week. If Alex agrees, is the new Beta contract enforceable? Why or why not?
Q:
A deceased joint tenant's interest in jointly held property passes to his or her heirs.
Q:
An accountant's liability under the Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 reÂquires privity of contract.
Q:
Carl pledges $1,000 to the Disaster Relief Organization (DRO). On the basis of the pledge, DRO orders additional rescue equipment. Carl fails to pay. In DRO's suit, a court may enforce the pledge
a. according to the preexisting duty rule.
b. as an illusory promise supported by past consideration.
c. on a theory of accord and satisfaction.
d. under the doctrine of promissory estoppel.
Q:
Milo files a suit against National Corporation under the doctrine of promissory estoppel. Milo must show that
a. Milo justifiably refused to fulfill a promise to National.
b. Milo justifiably relied on National's promise to his detriment.
c. National justifiably refused to fulfill a promise to Milo.
d. National justifiably relied on Milo's promise to its detriment.
Q:
It is presumed that a co-tenancy is a tenancy in common unless there is a clear intention to establish a joint tenancy.
Q:
A joint tenant's sale of his or her interest terminates the joint tenancy.
Q:
A person who holds all rights in property owns the property in fee simple.
Q:
An accountant is not liable for a misleading statement that affects the price of a security if the accountant acted in good faith.
Q:
Quinn promises to sell his recreational vehicle (RV) to Sid, who builds a structure behind his house in which to keep it. Quinn's attempt to renege on the promise is
a. effective if Quinn did not ask Sid to build anything.
b. effective if Quinn wants to sell the RV to someone else.
c. not effective if Sid cannot obtain a similar RV for a similar price elsewhere.
d. not effective if Sid is held to have detrimentally relied on the promise.
Q:
An unlimited number of persons can hold property as joint tenants.
Q:
An accountant who prepares a financial stateÂment in good faith may avoid liability under Section 18 of the Securities ExÂchange Act of 1934.
Q:
An accountant is not liable for a misstatement to a purchaser of securities who knew of the misstatement but invested anyway.
Q:
George and Holly disagree as to the exact amount one owes the other. They form a new agreement that, on fulfillment, will discharge the prior obligation. This is
a. a covenant not to sue.
b. an accord and satisfaction.
c. a release.
d. promissory estoppel.
Q:
Only two persons can hold property as tenants in common.
Q:
A failure to follow generally accepted accounting principles and generÂally accepted auditing standards is proof of a lack of due diligence.
Q:
Mei writes a check to Nat in an amount that represents half of her debt to him. On the back of the check, Mei includes the words "payment in full." Nat cashes the check. This discharges the entire debt
a. if the debt is liquidated.
b. if the debt is past due.
c. if the debt is unliquidated.
d. under no circumstances.
Q:
Tangible personal property represents a set of rights and interests but has no real physical substance.
Q:
An accountant's liability under the Securities Act of 1933 reÂquires privity of contract with the purchaser of a security.
Q:
Fine Retail Sales, Inc., promises its employees a bonus at the end of the year, if management thinks it is warranted. This promise is unenforceable by either party
a. only because it is not supported by consideration.
b. only because the quantity term in the contract was omitted.
c. because it is not supported by consideration and the quantity term is missing.
d. none of the above.
Q:
Fact Pattern 11-1
Sally contracts with Tasty Pizza Company to deliver its products. Both parties change their minds, however, and inform each other that they would like to cancel the contract.
Refer to Fact Pattern 11-1. The next day, Sally changes her mind and again offers to deliver Tasty's products. Tasty is willing to deal, but for a new price. Sally and Tasty
a. may agree to a new contract, but it cannot include a new price.
b. may agree to a new contract that includes the new price.
c. must perform their original contract.
d. must perform the part of their original contract that is executory.
Q:
Under the Sarbanes-Oxley Act, accountants must retain working papers relating to an audit or review for a certain period of time.
Q:
Bowie, a certified public accountant, prepares and certifies Candy Products Corporation's financial statements. These statements are included 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 privity 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?
Q:
Fact Pattern 11-1
Sally contracts with Tasty Pizza Company to deliver its products. Both parties change their minds, however, and inform each other that they would like to cancel the contract.
Refer to Fact Pattern 11-1. Sally and Tasty
a. may rescind their entire contract.
b. may rescind their contract to the extent that it is executory.
c. must perform their entire contract.
d. must perform the part of their contract that is executory.
Q:
Working papers are the documents through which a court orders an accountant to audit a public company.
Q:
Dominique, 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 2008, Eagle falls into serious financial trouble, but neither Dominique's reports nor her opinion letters indicate this situation. Relying on Dominique'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 Dominique's opinion letter. Dominique is aware of this reliance. If Dominique did not engage in intentional fraud but was negligent, what is her potential liability?
Q:
Johnson Bakery agrees to supply Higgen's Restaurant with all the bread that it requires for one year. When a shortage causes the price of wheat to rise sharply, Johnson can continue supplying bread only at a much higher price. The parties agree to modify the contract so that the buyer will pay a higher price. The change is
a. unenforceable due to the preexisting duty rule.
b. unenforceable because a valid contract already exists.
c. unenforceable because Johnson is taking advantage of a shortage to boost profits.
d. enforceable as long as the parties voluntarily agreed to the modification.
Q:
An accountant's working papers are the documents that are used and developed during an audit.
Q:
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
a. only to a third party who is a foreseeable user of the information.
b. only under a court order (with or without Quikfeet's consent).
c. only with Quikfeet's consent.
d. under any circumstances.
Q:
Bryce's accountant is Caleb and his attorney is Delilah. All states protect, as privileged information, Bryce's communications with
a. Caleb and Delilah.
b. Caleb only.
c. Delilah only.
d. neither Caleb nor Delilah.
Q:
The Sarbanes-Oxley Act applies to domestic, but not foreign, public accounting firms that provide auditing services to "issuers."
Q:
Baker agrees to supply Howard with goods from a foreign country. When the government in that country is overthrown in a violent revolution, it becomes impossible to obtain the goods except at a much higher price. This will
a. constitute a breach of the agreement because Baker can no longer supply Howard with the goods at the agreed price.
b. not constitute a breach of the agreement since the possibility of violent revolution is not the type of risk ordinarily assumed in business.
c. not constitute a breach of the agreement because a violent revolution would probably be characterized as an unforeseen difficulty.
d. both b and c.
Q:
An attorney may be liable in negligence to any third party who the attorney knows will rely on the attorney's work.
Q:
Flynn, an accountant, helps Grange Supply Company prepare and file a false federal corporate income tax return. Under the Internal Revenue Code, this is
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. a civil violation subject to a liability suit but not a crime.
Q:
Digital Computers (DC) agrees to sell one hundred hard drives to Eagle Computer Stores. Before they are delivered, DC demands an extra $100 per hard drive to complete delivery. With no other source for DC hard drives, Eagle agrees to pay. Regarding the agreement to pay more, a court would likely
a. enforce it.
b. rescind it.
c. order the parties to renegotiate it.
d. not enforce it.
Q:
An attorney may be liable to a third party who relies on the attorney's legal opinion to the third party's detriment
Q:
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
a. negligent or willful misconduct.
b. no misconduct.
c. only negligent misconduct.
d. only willful misconduct.
Q:
A-Plus Properties, Inc., and Best Construction Company sign a contract that specifies the amount to be paid. Additional compensation may be justified by
a. changes in the market value of the project during the contract.
b. extraordinary difficulties unforeseen at the time of the contract.
c. no circumstances.
d. ordinary business risks that occur after the time of the contract.
Q:
Under the Restatement (Third) of Torts, accountants can be held liÂable for negligence to any third parties.