Professional Liability

Question 1

What is the requirement for actual fraud suit against CPA

Answer 1

• material misrepresentation
• Scienter - intent to deceive
• Actual reliance
• Intent to induce reliance
• Damage

Question 2

What is the requirement for constructive fraud suit against CPA

Answer 2

• material misrepresentation
• Act recklessly or with gross negligent **
• Actual reliance
• Intent to induce reliance
• Damage

*** The only different to actual fraud

Question 3

Under “Ultramares” rule, who will the CPA be liable for negligence ?

Answer 3

Limit to party in privity and intended third parties beneficiaries.

Merely “foreseen” parties cannot recover.

Question 4

What must plaintiff prove against CPA under Section 11 of Security act of 1933 ?

Answer 4

He acquired the stock
He suffered a loss
Material misrepresentation or omission of fact

Plantiff need not prove scienter, reliance or negligence. Accountant is liable unless show due diligent

Question 5

What must plaintiff prove against CPA under Section 10(b) of 1934 Act ?

Answer 5

He bought or sold the stock
Use of some means of interstate commerce
Suffered a loss
Material misrepresentation or omission of fact
Scienter and reliance **
Suit must be brought within 1 year of discovery and 3 years of violation ***

** DIfference wt ‘33 act

Question 6

What are the elements of negligence to be proved against the CPA

Answer 6

• Duty of care exist
• Breach (of the duty of care)
• Casualty
• Injury