Q&A Hero

Q: If a promise is made, it will be enforced.

Q: Without a permit, Timberline Plywood Company discharges its untreated wastewater into Urban City's storm drainage pipes, which empty into Valley Creek. Under the Clean Water Act, this discharge is most likely a. a violation. b. not a violation because the company does not have a permit. c. not a violation because water is not a stationary source. d. not a violation because a storm drainage pipe is not a point source.

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: Performance that creates a legally binding contract may consist of an act.

Q: Fried Food, Inc., operates a commercial frying plant, discharging pol­lut­ants into the air. Greg reports the violations to the Environmental Protection Agency. Greg a. is not entitled to a payment. b. may be paid up to any amount. c. may be paid up to $1,000. d. may be paid up to $10,000.

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: Real Estate Investments, Inc., owns and manages an office building. Secure Insurance Company agrees to lease the building for five years. Under the lease, Secure is obligated to pay all of the utility costs. Two years into the term, Secure asks Real Estate to modify the lease to provide that the utility costs be split equally between them. Real Estate agrees, but later decides it does not want to share the costs and refuses to pay. Is the landlord bound to its agreement to share the utility costs? Why or why not?

Q: Ann promises to pay her cousin Bert, who is dangerously obese, $10,000 if Bert loses 100 pounds within the next two years. Bert agrees, performs his part of the bargain, and asks for the money. Ann refuses to pay, saying that she forgot about the deal, but that even if she did make such a pledge, there was no valid consideration for it. Bert files a suit against Ann. In whose favor is the court likely to rule, and why?

Q: Travis, 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.

Q: Industrial Solvents, Inc., averages $15,000 profit per day before deciding to ignore air pollution standards, after which the average is $30,000. Industrial Solvents is subject to a fine of a. $0. b. $15,000 per day. c. $30,000 per day. d. $30,000 total.

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: Metal Smelting, Inc., operates a planta "major source"that emits hazardous air pollutants for which the Environmental Protection Agency has set maximum levels of emission. The plant does not use any equipment to reduce its emissions. Under the Clean Air Act, this is most likely a. a violation. b. not a violation because a "major source" is exempt. c. not a violation because the plant does not use any equipment. d. not a violation because the plant is not a mobile source.

Q: Betty pledges to donate $1,000 to the Children's Hospital. On the basis of the pledge, the hospital orders additional equipment. Betty reneges on the pledge. The hospital sues Betty. If the court enforces the pledge, it will be a. because Betty's performance is uncertain. b. because of the unforeseen difficulties. c. because the pledge is a gift. d. under the doctrine of promissory estoppel.

Q: The operations of Metal Refining Industries, Inc., are major sources of air pollu­tion. These operations must use a. the absolutely cleanest air technology. b. the best available filter technology. c. the maximum achievable control technology. d. the most affordable scrubbing technology.

Q: Auto Body Repair Shop (ABRS) promises to pay Ben $1,000 a week to work for ABRS. Ben accepts and quits his job with Car Care Service. ABRS fails to provide a job for Ben. Ben has a cause of action based on a. an illusory promise. b. a release. c. past consideration. d. promissory estoppel.

Q: In a few states, communications between an accountant and his or her client are privileged.

Q: Collection of EZ Sales Company's debt to First Storage Corporation is barred by a statute of limitations. A new promise by EZ to pay the debt a. may become enforceable if payments are made. b. must be in writing. c. requires consideration. d. will not revive the obligation.

Q: Aiding or assisting in the preparation of a false tax return is a felony.

Q: Ski Resorts, Inc., wants to add a new run to its facility in a national park on federal land. For this action, an environmental impact statement is a. prohibited. b. required. c. unnecessary. d. voluntary.

Q: After an accident with a driver for General Transport Company (GTC), Paul signs a covenant not to sue GTC for damages in a tort action if it pays for the damage to his car. This covenant a. bars recovery only if GTC pays. b. is an illusory contract. c. is barred by the preexisting duty rule. d. is unconscionable.

Q: Rural Electric Company submits a bid to build a dam on federal land as part of a federal project. For this action, an environmental impact state­ment is most likely a. prohibited. b. required. c. unnecessary. d. voluntary.

Q: Accountants may be subject to criminal penalties for violations of federal securities laws.

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: Ann is injured in an accident caused by Bob. Bob agrees to pay Ann $2,500 if she agrees to release Bob from further liability. Ann agrees. If Ann's damages ultimately exceed $2,500, Ann can a. collect the balance from Bob in a breach-of-contract suit. b. collect the balance from Bob in a tort suit. c. collect the balance from Bob on the ground of unforeseen difficulties. d. not collect the balance from Bob.

Q: New Town Construction, Inc., wants to build a parking ramp to connect to its New Town Mall, both of which are on private land. For this action, an environmental impact statement is a. prohibited. b. required. c. unnecessary. d. voluntary.

Q: An accountant's liability under the Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 re­quires privity of contract.

Q: Rock Mining Company operates a gravel pit next to Siera's residence. Siera files a suit against Rock, alleging that the pit is a nuisance and unreasonably inter­feres with the enjoyment of her property The court is most likely to award Siera an injunction a. if letting the pollution continue is equally as harmful as stopping it. b. if letting the pollution continue is less harmful than stopping it. c. if letting the pollution continue is more harmful than stopping it. d. under no circumstances.

Q: Best Goods Company promises to pay its employee a bonus for work that they did the previous year. If Best fails to pay the bonus and the employees sue, the court will likely hold that the promise a. is enforceable because an employer has a moral obligation to do right by its employees. b. is enforceable because it is supported by an event that has already taken place. c. is enforceable because the promisor received no subsequent material benefit and the promisee rendered no subsequent services. d. none of the above.

Q: Under the Securities Exchange Act of 1934, an accountant may be liable for a misleading statement that affects the price of a security even if the accountant acted in good faith.

Q: Verna makes a living by commercial fishing in a river allegedly polluted by Wall Paint Company. To bring a suit against Wall Paint on the ground of private nuisance, Verna must allege that she suffers from a. a distinct harm separate from that affecting the general public. b. a lesser harm than an injunction would impose on Wall Paint. c. Wall Paint's failure to use reasonable care to avert herm to Verna. d. the same harm as that affecting the general public.

Q: Gamma Corporation promises to pay its employees a year-end bonus "if management thinks it is warranted." This is a. an enforceable contract. b. an illusory contract. c. an unconscionable contract. d. a unilateral contract.

Q: Kip opens an account at a Lotsa Goodies Store, and buys a digital music player and other items, but makes no payments on the account. To collect the debt, Mako, the manager, contacts Kip's parents. This violates a. no federal law. b. the Fair and Accurate Credit Transactions Act. c. the Fair Debt Collection Practices Act. d. the Truth-in-Lending Act.

Q: An accountant who prepares a financial state­ment in good faith may avoid liability under Section 18 of the Securities Ex­change Act of 1934.

Q: Mary promises to pay her assistant Ned $10,000 in consideration of the services he provided over the years. Mary never pays Ned. Mary is a. liable for payment of the $10,000. b. liable only if Ned still works for Mary. c. not liable, because the consideration is in the past. d. not liable, because the consideration was unintentional.

Q: MicroCorp hires Nick to work for one month at a weekly salary of $400. A MicroCorp representative orally agrees two weeks later to double Nick's salary. This agreement is a. enforceable because an employment contract is an adhesion contract. b. enforceable because the parties have executed an accord and satisfaction. c. unenforceable because Nick has incurred no additional detriment in exchange for MicroCorp's promise. d. unenforceable because Nick's performance is uncertain.

Q: An accountant is not liable for a misstatement to a purchaser of securities who knew of the misstatement but invested anyway.

Q: Dita takes out a student loan from Everloan Bank. When she fails to make the scheduled payments for six months, Everloan advises her of further ac­tion that it will take. This violates a. no federal law. b. the Fair and Accurate Credit Transactions Act. c. the Fair Debt Collection Practices Act. d. the Truth-in-Lending Act.

Q: A failure to follow generally accepted accounting principles and gener­ally accepted auditing standards is proof of a lack of due diligence.

Q: The credit department of Metro-Mart calls Nikki at work about an overdue bill. Nikki's employer objects. Metro-Mart continues to call Nikki at work. This is a viola­tion of a. no federal law. b. the Fair and Accurate Credit Transactions Act. c. the Fair Debt Collection Practices Act. d. the Truth-in-Lending Act.

Q: Quik Collection Agency calls Pat several times a day, and some­times in the middle of the night, about an overdue bill that Regal Sporting Goods turned over to Quik for collection. This is a violation of a. no federal law. b. the Fair and Accurate Credit Transactions Act. c. the Fair Debt Collection Practices Act. d. the Truth-in-Lending Act.

Q: An accountant's liability under the Securities Act of 1933 re­quires privity of contract with the purchaser of a security.

Q: National Business Company and One-State Sales, Inc., agree to simultaneously rescind their contract and enter into a new agreement under which their duties are the same. National later sues One-State to enforce the new agreement. The court a. may apply the preexisting rule or allow the rescission. b. must allow the rescission. c. must apply the preexisting duty rule. d. must not apply the preexisting rule or allow the rescission.

Q: Fact Pattern 12-1 Central Construction Company (CCC) begins building a restaurant for Diners Cafe Corporation, but after two months demands an extra $100,000. Diners agrees to pay. Refer to Fact Pattern 12-1. If CCC offers, as a reason for the extra $100,000, that extraordinary unforeseen difficulties will add considerable cost to the project, the agreement is b. enforceable as an accord and satisfaction. b. enforceable because of unforeseen difficulties. c. unenforceable as an illusory promise. d. unenforceable due to the preexisting duty rule.

Q: Bodie's application to City Bank for a credit card is denied. Bodie can obtain information on her credit history in a credit agency's files under a. no federal law. b. the Equal Credit Opportunity Act. c. the Fair Credit Reporting Act. d. the Fair Debt Collection Practices Act.

Q: Under the Sarbanes-Oxley Act of 2002, an accountant must destroy working papers on the conclusion of the audit to which the papers relate.

Q: Fact Pattern 12-1 Central Construction Company (CCC) begins building a restaurant for Diners Cafe Corporation, but after two months demands an extra $100,000. Diners agrees to pay. Refer to Fact Pattern 12-1. If CCC offers, as a reason for the extra $100,000, that ordinary business expenses have increased, the agreement is a. enforceable as an accord and satisfaction. b. enforceable because of unforeseen difficulties. c. unenforceable as an illusory promise. d. unenforceable due to the preexisting duty rule.

Q: Working papers are the documents through which a court orders an accountant to audit a public company.

Q: Kirk receives an unsolicited credit card in the mail and tosses it on his desk. Without Kirk's permission, his roommate Leif uses the card to buy a new laptop for $1,800. Kirk is a. liable for $1,000. b. liable for $500. c. liable for $50. d. not liable for any amount.

Q: Fact Pattern 12-1 Central Construction Company (CCC) begins building a restaurant for Diners Cafe Corporation, but after two months demands an extra $100,000. Diners agrees to pay. Refer to Fact Pattern 12-1. If CCC offers no reason for the extra $100,000, but says only that it will otherwise stop construction, the agreement is a. enforceable as an accord and satisfaction. b. enforceable because of unforeseen difficulties. c. unenforceable as an illusory promise. d. unenforceable due to the preexisting duty rule.

Q: An accountant's working papers are the documents that are used and developed during an audit.

Q: Consumer Finance Corporation (CFC) extends credit to consumers. CFC is subject to the Equal Credit Opportunity Act, which prohibits credit dis­crimination based on a. intelligence. b. education. c. income. d. race.

Q: Tory borrows $10,000 from USA National Bank to remodel a room in her home. This transaction is subject to a. no federal law. b. the Consumer Leasing Act. c. the Consumer Product Safety Act. d. the Truth-in-Lending Act.

Q: In Case 12.2, Seaview Orthopaedics v. National Healthcare Resources, Inc., the court held that it would not examine the adequacy of consideration so long as a. it is obvious that the consideration was adequate. b. one of the parties claimed that there was adequate consideration. c. something of value has passed between the parties. d. the consideration was worth more than $100.

Q: A public accounting firm is a firm engaged in the practice of accounting "in the public interest."

Q: Creditworthy Loan Company extends credit in the ordinary course of its busi­ness. Under the Truth-in-Lending Act, Creditworthy must inform potential borrowers of a. credit terms offered by other lenders. b. comparative prices for goods to be bought with the borrowed funds. c. Creditworthy's credit terms. d. the borrower' credit scores.

Q: Paul offers Rita $1,000 for her $5,000 computer. Rita knowingly and voluntarily agrees to the offer but later sues Paul. A court would likely a. set aside the agreement as unfair. b. set aside the agreement because the consideration is inadequate. c. not question the adequacy of the consideration. d. consider such a suit to be frivolous.

Q: An attorney may be liable in negligence to any third party who the attorney knows will rely on the attorney's work.

Q: Steel Tool Company makes and sells tools. One of the tools is believed to be haz­ardous. The appropriate government agency may require Steel to a. export the tool and sell it only abroad. b. increase the price to cover the cost of any injuries or damage. c. reduce the price to indicate the hazard to consumers. d. remove the tool from the market.

Q: Alpha, Inc., defends against a breach-of-contract suit by Beta Corporation by claiming that the consideration for their contract was inadequate. A court will not normally evaluate the adequacy of consideration unless it is a. fairly unbalanced. b. grossly inadequate. c. negligently unreasonable. d. willfully unfair.

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: Corner Market sells groceries. Delite Food & Drug Store sells groceries and fills prescriptions. The chief responsibility to prevent unsafe food and drugs from being sold rests with a. the Consumer Product Safety Commission. b. no single federal agency. c. the Federal Trade Commission. d. the Food and Drug Administration.

Q: Under the Restatement (Second) of Torts, accountants can be held li­able for negligence to any third parties.

Q: Bob defends against a breach-of-contract suit by Ace Credit Corporation by claiming that the consideration for their contract was inadequate. Inadequate consideration may indicate a. fraud only. b. duress or undue influence only. c. fraud, duress, or undue influence. d. none of the above.

Q: Ida promises to pay Jon, her son, $15,000 if he obtains his degree at Kappa University, where he is currently in his second year. Jon graduates. Ida is a. not required to pay, because Jon was already at Kappa. b. not required to pay, because obtaining a degree benefits Jon. c. required to pay, because a job can be hard to find after college. d. required to pay, because Jon obtained a degree at Kappa.

Q: In most courts, accountants can be liable for negligence to any known us­ers of the accountants' finan­cial reports.

Q: Under federal law, the calorie content of the food on a menu must be posted by Organic Mix, LLC, if Organic Mix is a. a restaurant chain with twenty or more locations. b. a food distributor with twenty or more customers. c. a food processor with twenty or more products. d. a food producer with twenty or more acres.

Q: If a third party will be affected by a contract, the parties to the contract are in privity with the third party.

Q: Sweet Treats, Inc., wants to market a new snack food. On the prod­uct's la­bel, standard nutrition facts are a. prohibited. b. required. c. strictly voluntary. d. warranted by the nature of the food.

Q: Don wants to exchange his performance for Earl's promise. As consideration, performance that is legally sufficient may consist of a. an act only. b. a forbearance from an act only. c. an act or a forbearance from an act. d. none of the above.

Q: Traditionally, a professional owed a duty only to those with whom the professional had a direct contractual relationship.

Q: Bright Brew Coffee, Inc., processes and sells a variety of coffee products. Bright Brew's product packages must include a. the identity of the company owner. b. the net quantity of the contents. c. the restaurants and stores in which the product is sold. d. the type of consumer most likely interested in the product.

Q: Alan promises to pay Beth $500 to install a pump in his factory. Beth completes the installation. The act of installing the pump a. imposes a moral obligation on Alan to pay Beth. b. imposes no obligation on Alan unless he is satisfied with the job. c. is not sufficient consideration because it is not goods or money. d. is the consideration that creates Alan's obligation to pay Beth.

Q: A professional cannot be liable for fraud in the absence of fraudulent intent.

Q: A businessperson who sells a business in reliance on promises by another is not entitled to damages under the doctrine of promissory estoppel.

Q: The doctrine of promissory estoppel requires a clear and definite promise.

Q: Va-Va-Voom Products, Inc., engages in de­ceptive advertising when it markets its product Weight-No-More as able to help consumers lose weight in their sleep. Va-Va-Voom is ordered to include in all future adver­tising of Weight-No-More the statement, "This product will not cause anyone to lose weight while sleeping." This is a. a counteradvertising order. b. a multiple product order. c. a "cooling-off" law. d. a validation notice.

Q: Cleaners & Solvents, Inc. (CSI), engages in de­ceptive advertising when it markets its product Dirt Remover as able to kill germs over long periods of time. In an action against CSI regarding Dirt Remover, the firm is ordered to stop its false advertis­ing of Dirt Remover and other products. This is a. a counteradvertising order. b. a multiple product order. c. a "cooling-off" law. d. a validation notice.

Q: Each state establishes rules that govern the conduct of attorneys

Q: A covenant not to sue does not always bar further recovery.

Q: Precise GPS Company's ad states that its product is "the finest that money can buy." Because of this ad, the Federal Trade Com­mission is most likely to issue a. a cease-and-desist order. b. a counteradvertising order. c. a multiple product order. d. none of the choices.