Legal Duties and Responsibilities

Question 1

Under a common law negligence majority rule against a CPA, which of the following parties has privity?

a. Client
b. Intended third party
c. Foreseen
d. Foreseeable
e. Unforeseeable

Answer 1

a. Client
b. Intended third party
c. Foreseen

Question 2

Under a common law negligence minority (Ultramares) rule against a CPA, which of the following parties has privity?

a. Client
b. Intended third party
c. Foreseen
d. Foreseeable
e. Unforeseeable

Answer 2

a. Client
b. Intended third party

Question 3

Which of the following parties have privity in a fraud or gross negligence suit against a CPA?

a. Client
b. Intended third party
c. Foreseen
d. Foreseeable
e. Unforeseeable

Answer 3

Not applicable. While clients and intended third parties have privity, privity is not needed as proof in a negligence suit against a CPA.

Question 4

What are the defenses for negligence?

Answer 4

1. Statute of limitation passes
2. Followed tax law (show due professional care)
3. Lack of privity (cannot use against client or intended 3rd party)
4. Comparative negligence

Question 5

What are defenses for fraud?

Answer 5

1. Statute of limitation passes
2. Not grossly negligent (showed due professional care)
3. Not material
4. Lack of intent (acted in good faith and no knowledge of falsity or lack of scienter)