CPA - REGULATION PERSONAL Flashcards
1
Q
What is JEEP?
A
Joint Ethics Enforcement Program
2
Q
Who handles ethical complaints with national implications when it comes to CPAs?
A
The AICPA
3
Q
What is scienter?
A
Whether or not a person or company has a “guilty mind”
4
Q
Who is generally impacted in a fraud case?
A
“reasonably foreseeable” victims
5
Q
What element must be proven in constructive fraud?
A
Gross negligence
6
Q
What is the majority (restatement) view?
A
Limiting an accountant’s liability to a limited class of actually foreseen users
7
Q
What is the “Ultramares” rule?
A
An accountant’s liability is only to those they are in privity of contract with
8
Q
How can a CPA be convicted of common law fraud?
A
With knowledge of misstatements or recklessly making the misstatements
9
Q
When does actual fraud occur?
A
An accountant makes a statement they know is false
10
Q
When does constructive fraud occur?
A
An accountant makes a statement they have no reasonable grounds to believe is true
11
Q
What are the two key provisions of the Foreign Corrupt Practices Act (FCPA)?
A
- Anti-bribery 2. books and records and internal accounting controls
12
Q
What does RICO stand for?
A
Racketeer Influenced Corrupt Organizations Act
13
Q
How long must audit and review papers be retained for?
A
7 years
14
Q
When is disclosing a client’s name not acceptable?
A
When they are experiencing financial difficulties (i.e. bankruptcy)
15
Q
What does 26 USC Sec. 7525 provide?
A
Modest testimonial privilege to clients of all tax advisers- only for noncriminal matters- exempts written tax shelter advice
16
Q
What does GAPP stand for?
A
Generally Accepted Privacy Principles
17
Q
What is a bilateral contract?
A
A promise in exchange for a promise creating a contract
18
Q
What is an executory contract?
A
One not fully performed
19
Q
What does common law cover?
A
- real estate- services (employment)
20
Q
What does the Uniform Commercial Code (UCC) cover?
A
- Sales of goods- Goods and services combined
21
Q
What methods can express contracts be in?
A
Oral or written
22
Q
What are implied-in-fact contracts?
A
Agreeing to a service before payment is determined
23
Q
What is a unilateral contract?
A
A promise in exchange for performance
24
Q
Executed contract
A
One that is fully performed
25
What is the "mirror image" rule?
If a response is not a mirror image acceptance of an offer, it is a rejection and a counteroffer (common law)
26
What are most general business advertisements?
Simply invitations to trade
27
What are the three main elements of a contract?
offer, acceptance, and consideration
28
What do you need for an offer to be valid under Common Law?
1. present intent - objective basis2. language - all details
29
What do you need for an offer to be valid under UCC?
1. present intent - objective basis2. language - subject matter
30
What brings termination?
- rejection- counteroffer - revocation*All effective upon receipt
31
What other things bring termination?
- death of offeror- bankruptcy- illegality
32
What is an option?
- paid-for offer- consideration required- irrevocable
33
What are the requirements for a Merchant Firm Offer (UCC)?
- writing- signed- by a merchant - states it will be kept open (max three months)*need an option over three months
34
What happens with a conditional acceptance?
Counter offer and rejection (usually prepositional phrases)
35
When no means are given and the same or faster method of communication is used, when is the acceptance of an offer effective under UCC?
When properly mailed - Mailbox Rule applies
36
When no means are given and the same method of communication is used, when is the acceptance of an offer effective under Common Law?
When properly mailed - Mailbox Rule Applies
37
When no means are given and a slower method of communication is used, when is the acceptance of an offer effective under UCC?
When received if the offer is still open
38
When no means are given and a different method of communication is used, when is the acceptance of an offer effective under Common Law?
When received if the offer is still open
39
When specified means (stipulated) are given and specified means are used, when is the acceptance of an offer effective under UCC and Common Law?
Mailbox Rule
40
When specified means (stipulated) are given and specified means are not used, when is the acceptance of an offer effective under UCC and Common Law?
counteroffer and rejection
41
When prompt shipment is the offer and the proper goods are shipped, when is the acceptance of an offer effective under UCC?
Upon shipment
42
When prompt shipment is the offer and improper goods are shipped, when is the acceptance of an offer effective under UCC?
breach and acceptance
43
What constitutes consideration?
A promise to do something new or something not already obligated to do
44
What is the definition of consideration?
Doing what you're free not to do or not doing what you are free to do
45
Why are charitable subscriptions a consideration issue?
Enforceable despite lack of detriment on one side
46
What's wrong with preexisting obligations when it comes to consideration?
Not sufficient consideration
47
When is a modification enforceable?
- UCC - in good faith- Common Law - with additional consideration
48
What is a liquidated debt?
The terms are clear as far as payment, interest, etc. (i.e. a mortgage)
49
What is a un-liquidated debt?
You acknowledge you owe a debt, but disagree on the amount
50
What is the standard statute of limitations on contracts?
four years
51
What does the parol evidence rule prohibit?
The introduction of evidence that additional terms were agreed upon before the contract was signed
52
Over what dollar amount must sale of goods contracts (UCC) be in writing?
$500 or more
53
When must the sale of land be in writing?
Always
54
For what time period must a services contract always be in writing?
1 year or greater
55
What satisfies the Statute of Frauds?
- Record- Signature - Sufficient terms
56
What are the requirements for a merchant's confirmation memo?
- writing (record)- signed by one of the merchants- underlying oral agreement- two merchants required
57
What are the UCC exceptions under the Statute of Frauds?
- Goods actually accepted - buyer- Payments actually received - seller- Specially manufactured - Admission - in any proceeding while under oath
58
When can a minor disaffirm a contract?
While still a minor and for a reasonable time after reaching the age of majority (voidable contract)
59
What happens if a buyer accepts an offer containing an immaterial unilateral mistake?
The contract is still valid
60
How can a minor upon turning 18 ratify a contract?
By specifically promising to be bound by the entire contract, either written or orally
61
How must an adult perform with a contract with a minor?
They are bound to it and must perform regardless
62
What is duress?
Threats that overcome one's free will inducing a person to assent to a contract
63
What four proofs from the defendant are required in a common law fraud action?
- a false statement of fact or misrepresentation- knowledge of the false statement - reliance by the plaintiff- a loss suffered by the plaintiff
64
How are future contracts treated if a person is declared insane?
All void
65
What are the requirements for being (not declared) insane (voidable contracts)?
- don't understand the nature of contracts- did not understand the effect of a specific contract
66
What happens to a contract if you are drunk to the extent of mental incapacity?
Voidable
67
What is the defense to a unilateral mistake of fact?
No defense
68
What is the defense to a unilateral mistake in computation?
Defense is within range or offeree knows
69
What happens under a mutual mistake of fact?
Valid defense
70
What do you need under innocent misrepresentation to rescind a contract?
- a basis of the bargain- fact or promise
71
What must occur to use fraud as a defense to rescind a contract?
- material misstatement/basis of bargain- must prove knowledge- must prove intent to defraud- (can be rewarded punitive damages)
72
What happens under an accord and satisfaction?
Parties agree to accept a difference performance and the substituted performance is performed
73
What is a mutual rescission?
Both parties agree to the discharge of their obligations
74
What happens if a service becomes illegal to perform?
Discharge of a party's duties
75
What is a rescission?
An undoing of a contract
76
What at the three types of conditions that can be present in a contract?
- conditions precedent- conditions concurrent- conditions subsequent
77
What happens when conditions fail in a contract?
Performance is discharged
78
What are the tests under substantial performance?
- Is it for practical purposes just as good- Was it done in good faith- Can the party be compensated
79
What is anticipatory repudiation?
Breach before performance is due
80
When are nominal damages awarded?
Under a technical breach
81
What are compensatory damages?
Return parties to original positions as if there was no breach
82
What are liquidated damages?
Agreed-upon in advance damages; alternative to compensatory damages
83
What is specific performance?
Requiring breaching party to perform; used against seller in land contract
84
What rights do incidental beneficiaries have under a contract?
They don't. They may not sue to enforce contracts.
85
What two things make a creditor beneficiary?
1. One party to a contract in question owed the creditor money2. The contract in question was made specifically to satisfy the debt
86
What is not normally transferred under delegation?
liability
87
What does the Statute of Frauds require under the UCC?
- the signature of the person to be charged- the quantity of goods ordered- written evidence of an agreement
88
What are the open terms under the UCC?
Price, payment, and delivery
89
What if you ship the wrong thing under UCC without advanced notice?
Breach and acceptance at the same time
90
What does shipment mean under the UCC?
Acceptance
91
What does conditional acceptance result in under common law and UCC?
A counter offer
92
If a non-merchant accepts with additional terms what happens?
Contract without additional terms
93
If a merchant accepts with additional terms what happens?
Have to check if it is material, there is an objection, or the offer is limited. If immaterial, it is usually included.
94
When does risk of loss pass from seller to buyer in a F.O.B. place of shipment contract?
When the goods are placed in possession of the carrier
95
When does risk of loss pass from seller to buyer in a F.O.B. buyer's place of business contract?
When the goods are delivered to the buyer's destination
96
When does identification occur on existing goods?
At the time of contracting
97
When are future and fungible goods identified?
When the goods are shipped, marked, or otherwise designated for the buyer
98
What does COD mean?
Collect or cash on delivery
99
What are the rules under CF?
- lump sum; cost and freight- risk-buyer upon delivery to carrier - title-buyer upon delivery to carrier- expense-seller includes cost of freight in contract price
100
What can a thief never do with a title?
Pass good title
101
What are the three types of express warranties under the UCC?
- Affirmations of fact or promises- Description of the goods- Sample or model
102
What implied warranties does the UCC give the buyer (unless disclaimed by the seller)?
- Fitness for a particular purpose- Merchantability - The usage of trade
103
How is an express warranty created?
Affirmation of fact or promise of performance
104
What is the restriction and disclaimer for an express warranty?
- Must be part of the basis of the bargain- Can't make a disclaimer inconsistent with a express warranty
105
How is an implied warranty of merchantability created?
- Given in every sale of goods by a merchant
106
What is the restriction for an implied warranty of merchantability?
- Only given by merchants
107
What is the disclaimer for an implied warranty of merchantability?
- If written, must be conspicuous - Must use disclaimer of quality or use "merchantability" or general disclaimer "as is" or "with all faults"
108
How is an implied warranty of fitness for a particular purpose created?
- The seller knows of the buyer's reliance for particular use
109
What is the restriction for an implied warranty of fitness for a particular purpose?
Seller must have knowledge - buyer must rely
110
What is the disclaimer for an implied warranty of fitness for a particular purpose?
- Must be in writing- Must be conspicuous - Must be clear there are no warranties - Also disclaimed with "as is" or "with all faults"
111
When is a warranty of title created?
Given in every sale
112
What is the restriction on warranty of title?
Doesn't apply in circumstances where apparent warranty is not given
113
What is the disclaimer on warranty of title?
Must state there is no warranty of title
114
What are the rules under product liability - strict tort liability?
1. Defective condition unreasonably dangerous2. Defendant in the business of using, selling, or manufacturing the product3. Condition of product is the same*(knowledge of the defect is required for punitive damages)
115
What is wrong with a disclaimer of warranty for personal injury?
It violates public policy
116
What does a C.O.D. (cash on delivery) contract not permit before payment is made?
Inspection of the goods, but can be later rejected if nonconforming
117
What rights are available on a buyer when the seller commits an anticipatory breach of contract?`
- demand assurance of performance- cancel the contract
118
When can a revocation of acceptance occur?
After acceptance; must materially impair value and either a defect non-discoverable or a promise to cure
119
Right to cure
Upon notification by the buyer, prior to performance date, Seller has the right to get conforming goods to the buyer
120
When can a seller stop delivery under Article II?
- insolvency- advance breach by buyer
121
When can a seller recover the resale price under Article II?
- the buyer fails to take the goods (k price - resale price + incidental damages expenses saved)
122
When can a seller recover the market price under Article II?
- the buyer fails to take the goods (k price - market price + incidental damages expenses saved)
123
When can a seller recover for action for price under Article II?
- specially manufactured goods (K price + incidental damages - expenses saved)
124
When can a seller recover for lost profit under Article II?
- anticipatory repudiation (profits + incidental damages - salvage value)
125
When can a buyer recover under specific performance (replevin / identification)?
- For rare, unique goods - buyer gets goods (incidentals)
126
When can a buyer recover the cover price?
- the seller fails to deliver (cover price - K price + incidentals + consequential damages - expenses saved)
127
When can a buyer recover the market price?
- the seller fails to deliver (market price - K price + incidentals + consequential damages - expenses saved)
