Accountant's Legal Liability Flashcards Preview

Business Law 302 Exam 2 > Accountant's Legal Liability > Flashcards

Flashcards in Accountant's Legal Liability Deck (17)
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1
Q

What did accountants do as their biggest risk reduction?

A

Created LLPs

2
Q

What is contract liability?

A

The employment contract between an accountant and her client is subject to contract law general principles.
The accountant is bound to perform all the duties she expressly agrees to provide.

3
Q

What are implicit duties of an accountant?

A

The accountant must perform the contract competently and professionally.

4
Q

Who are beneficiaries of contract liability?

A

Contract liability extends to the client/contracting party and to third-party beneficiaries.

  • When you audit a firm’s statements, the creditors/shareholders/vendors are beneficiaries
  • You’re held responsible to these beneficiaries
5
Q

What is the limit for damages on a contract?

A

Limit is $$ up to contract value

6
Q

What are the four parts of a tort?

A

You must prove each of the following:

1) Duty
2) Breach of duty
3) Breach caused injury
4) Injury caused damages
- however, company’s loss of $$ doesn’t necessarily mean you caused it

7
Q

What is negligence in terms of accountancy?

A
  • An accountant is liable for failing to exercise the degree of care a reasonably competent accountant would exercise in these circumstances.
  • Standard of care is different everywhere
  • Expert witnesses testify as to the standard of care
8
Q

Are you liable to third parties as an accountant?

A

When working for a public company, you’re liable to third parties

9
Q

What is the liability for fraud?

A

An accountant committing a fraudulent act is liable for both compensatory and punitive damages to any person who he should have reasonable foreseen would be injured.

  • Fraud = cheating, higher liability than a mistake
  • Fraud is INTENTIONAL, you need to prove malice because they won’t admit they screwed up
  • “Gross negligence”
10
Q

What is a fraudulent act?

A

A false representation of material fact; made with knowledge and intension to deceive, and is justifiability relied on

11
Q

What does state law impose criminal liability on accounts for?

A
  • Willfully certifying false documents
  • Altering or tampering with accounting records
  • Using false financial reports
  • Giving false testimony
  • Committing forgery
12
Q

What can an accountant disclose in his working papers?

A
  • An accountant owns his working papers but may not disclose their contents unless the client agrees or a court orders the disclosure
  • What you find out from your client is not privileged information (unlike a lawyer) and you must testify
13
Q

Do accountants ever have privileged information?

A

Some accountants in the IRS have limited privileged information

14
Q

Can lawyer duties/accountant duties replace each other?

A

NO, they cannot.

15
Q

Can accountants give personnel advice to clients?

A

They can, but should not, because the information is not privileged

16
Q

Is the Statute of Limitations uniform for accounting?

A

NO!

17
Q

Look at Accountants Liability under Federal Securities Law

A

Look at Accountants Liability under Federal Securities Law