Common Law Flashcards
Common Law (111 cards)
1
Q
Agent
A
- Independent contractor is not an agent
- Consideration is NO required
- Written agreement is NOt required except:statute of frauds (service + 1 year/selling real estate)
2
Q
Sole Proprietorship
A
One individual doing business
Unlimited liability
No state filing General
3
Q
General Partnership/Limited Partnership
A
General—Unlimited liability
Limited—
General partner( at least one),
Limited partner(investor)
state filing
Adding new General or Limited partners requires written consent of all limited
partners
assign interest>no unanimous consent
assign property>unanimous consent
4
Q
Limited Liability Company/Limited Liability Partnership
A
LLP—Personal asset not at risk state filing articles of organization
ability to ‘pierce the corporate veil’
owners will be accused after bankruptcy if the LLC has been created with bad intent such as ‘thinly capitalized’
nonmember can be a manager
5
Q
Blue sky law
A
state security law
6
Q
Dividend
A
Once declared, dividends become company’s debt and may not be rescinded unless
fraud or illegality was involved in their declaration.
7
Q
Shareholder’s rights
A
Right to inspect books and records (not allowed if improper motive)
8
Q
General partners are jointly liable for
A
partnership torts
9
Q
Priority
A
bond holder>shareholder>unsecured judgement creditor>unsecured creditor
10
Q
dissenting stockholder’s
appraisal right generally applies to which
of the following corporate actions?
A
Consolidations - Yes
Short term mergers - Yes
dissenting stockholder:Who has not voted for the decision
appraisal right :to be bought of stocks they owned
11
Q
Which of the following must take
place for corporation to be voluntarily
dissolved?
A
Passage(approval) by the board of directors of
a resolution to dissolve
12
Q
For suing CPA who issue unqualified opinion on MM FS, plaintiff need to prevail
1933:
1934:
A
1933: MM, Monetary loss
1934: MM, Monetary loss, Reliance on FS, and Scienter
1933 is easier to claim
13
Q
Exempt securities: don’t need to register to SEC
A
Governmental purposes
Not- for- profit organizations
Short- term paper
14
Q
Registry Exemption for Regulation Crowdfunding
A
- Can raise up to $1 million within 12 months
- Investors: Any number of either accredited or unaccredited
- securities cannot be resold within 1 year
15
Q
Registry Exemption for Rule 504
(NO MORE 505)
must be notified within 15 days of first sale
A
- can sell up to 5M
- Accredited/UnAccredited no limit
- Holding Period: At least 1 yea
- NO general Ad
16
Q
Registry Exemption for Rule 506
(NO MORE 505)
must be notified within 15 days of first sale
A
- Unlimited amount of money can be raised w/o time limit
- General Ad for Accredit investors
- Holding period:At least 1 year.
- Accredited:unlimited
- Unaccredited:Less than 35
17
Q
1934 ACT
A
- for secondary offerings
- registration required for
a. With listed securities or
b. Assets in excess of $10 million and have at least 500 shareholders
2. Securities exchanges
3. Brokers and dealers engaged in interstate commerce
18
Q
Offer termination
A
- Counteroffer: Effective when received
- Offeror usually can revoke anytime before acceptance
- Option Contracts: Offeree pays consideration to keep an offer open. (Counteroffers have no effect on options.)
- Sale of Subject Matter to Another (only when the offeree learns of it)
19
Q
Mailbox Rule
A
Acceptance is valid when sent/dispatch if offeree uses an equally fast method to accept the offer. When offeree uses a slower method, acceptance t a k es effect when received.
同じ方法か、それより早い方法で返事をした時がacceptの日付。返信方法に規定がない場合は、常にmailbox ruleを覚えておく
20
Q
If offerer stipulate means of acceptance,
A
offeree needs to follow that method.
if offeree replied in different method, that will be counter offer.
21
Q
Bilateral vs. Unilateral
A
- Bilateral: A promise for a promise
2. Unilateral: A promise in exchange for an act
22
Q
Actual Fraud 詐欺
A
- Material
- Scienter (intention to deceive)
- Reliance
23
Q
Constructive Fraud (gross negligence) 重過失
A
- Material
- Reckless disregard for the truth 調べてない
- Reliance
24
Q
STATUTE OF FRAUDS
Need only be signed by one party, but can only be enforced against the one who signed（どちらかがサインしてれば契約成立。しかしサインしてない人は訴えられない）
A
- Sale of Goods of $500 or more
- Real estate contracts *Impossible to perform in 1 year (from the day made contract)
- Promise to pay the debt of another surety ship 保証人契約は書面
25
Exceptions of STATUTE OF FRAUDS
* Contract fully performed by both parties (executed contract)
* Contract fully performed by one party and the other is required only to pay money
* Buyer has entered land and made substantial improvements
26
Minors: Can disaffirm most contracts 契約解除できる
Minorsからはできる、大人側は相手が子供だからという理由で解除できない
Cannot disaffirm real estate contracts while a minor
27
PAROL EVIDENCE RULE
読まずにサインした人が悪い、というルール
Cannot contradict a written contract in court with oral or written evidence
Evidence relating to things before or during the writing is inadmissible以前の口頭の約束は証拠として採用されない
28
Creditor Beneficiary
受益債権者
A and B make contract intending to benefit C.
If there is a breach, C can sue both of them.
29
Novation
When creditor releases teh old debtor
30
Assignment: Most contract rights can be assigned and duties delegated
* Cannot alter performance materially
| * Personal service contract requires special skill cannot be assigned
31
S Corp's shareholder
OK: Individual, estate and trust
NO:General Partnership
32
Which is NOT subject to registration requirements of the Securities Act of 1933?
* interstate commerce 州内の居住者だけにofferされたものはexempt
* NPO
* Stock split
* Commercial paper
* Small offerings
* Life insurance contracts (except secuirty issued by insurance company)
33
No additional consideration is needed when modifying an existing sales of
Goods contract.
In contract law, additional consideration is needed to modify a real estate
or employment contract.
34
Firm Offers
MUST be made by MERCHANTS(retailer, whole saller)
1. Must be written (not oral).
2. Must be made by a merchant.
3. Must state that offer is irrevocable.
4. Duration: If not stated in offer, then duration is a reasonable time, (not to
exceed 3 months)
5. No consideration needed
Sales (option contract requires consideration)
35
Place of Delivery: Not stated, then
seller’s place (not buyer's place)
36
Sales contract statue of frauds
Contract in Writing: Sale of goods of $500 or more
Must state major terms of the contract and quantity
Merchant=retailer, wholesaler
Exceptions: No writing required (even if $500 or more) IF.
1.special goods
2. Part already received
3.Merchants Confirming Letter Rule: When a confirming letter is issued
between two merchants and neither merchant objects within 10 days, both
parties are bound by the terms of the contract as if both parties had signed
the letter.
37
Goods Held by Seller:
Title passes when contract is made and seller completes performance agreed
upon.
Merchant Sellers: ROL passes when buyer receives goods.
Non-merchant Sellers: ROL passes upon tender of delivery.
38
Negotiability
Commercial paper(Notes/check)を譲渡する事。negotiabilityが無ければ譲渡された人はお金をもらえない
39
Negotiability:SUMBOD
* signed by Maker or Drawer
* Unconditional(他の人に土地が売れたら、そのお金で払う、みたいのはダメ）
* Paid in Money(not in gold etc)
* must be payable to Order or Bearer eg: Pay to Fox is not good!
exception: Pay to cash（勘定科目）はBearer paperだと想定する!
* draft is payable on demand
40
Once negotiability is established, it's always negotiable.
Once non-negotiability is established on face, it's always non-negotiable.
41
Order/Bearer example
1. Pay to the order of bearer
2. Payable to Madonna
3. Payable to Madonna or bearer
4. Payable to the order of Bush
1. Bearer
2. Neither of them
3. Bearer
4. Order
42
Blank endorsement makes the instrument
bearer paper for next negotiation
43
Special endorsement makes the instrument
order paper for the next negotiation
Front of instrument says Pay to the order of Tom Heath. On the back Tom endorses
Pay to Ivan fox, Tom Heath. Need not, but may say Pay to the order of Ivan Fox.もう表でnegotiabilityが確立されているので、裏ではbearer/order等は書かなくてもよい。
44
“Without Recourse ”
Doesn’t guarantee payment by the primary party
これをしてなければ、makerが破産した時自分がliableになってしまう。それが嫌ならこの言葉を書くべき。
45
A trade acceptance（kind of draft) is an instrument
| drawn by a
Seller ordering the buyer or designee
| to make payment.
46
Certificate of Deposit CD is
bearer paper
'A bank issues a negotiable instrument that acknowledges receipt of $XXXX' > this is about CD
47
Draft involves 3 people (drawer,drawee and payee)
Note: 2 people (maker and payee)
Check(type of draft) is on demand.
| if payment date is written on face, it's not check.
48
When the payee is a name of account (such as 'pay to the order of cash') this is
bearer paper
49
'I promise to pay to the order of Custer Corp.
$10,000 within 10 days after the sale of my two carat
diamond ring. '
The instrument is nonnegotiable
because it is not payable at a definite time.>
Subject to another agreement destroy negotiabiity!
50
liability priority:
note 1. maker 2. endorser(unless they write 'without recorse' on face )
draft 1.drawee(bank) 2. drawer
51
the undersigned promises to pay
to the order of Ian Wolf
(back)
1.Ian Wolf
2.Pay: George Vernon
Samuel Thorn
3.Pay: Alan Yule
George Vernon
4.Alan Yule
Order, bearer, order, order, bearer
1と３は支払者をspecifyしていない！order paper holderになるには直前の人のspecified endorsementが必要
52
Breach of contract=Personal defense
Real defense:
Infancy
Forgery
Material Alteration
Illegality, Insanity, or Insolvency of maker
Fraud in the Execution(本人の意図せず小切手が切られた場合）
*Fraud inducementは騙されていたとしてもmakerが小切手を振り出している場合で、real defense としては使えない。
53
When holder has check certified,
all prior parties released except one
| certifying
54
Purchase Money Security Interest (PMSI)
It is a PMSI if collateral is bought with money loaned or credit given お金を借りて買ったものを、その借金も担保に取られている（銀行から借金して車を買う）
only for selling to consumers, not for merchants
PMSI creditor gets special rights against other creditors of the debt
55
Security Interest: Property right that allows the creditor to take possession of the
property in the event the debtor does not pay.
Ways to take a security interest
1. Possession of the collateral
a. Negotiable instruments, documents of title, stocks, bonds
b. Can’t seize or possess intangible property (accounts receivable)
2. Written security agreement signed by debtor (chattel paper)
3. Authenticated signature
56
Attachment: The Creditor’s right against the debtor
Perfection: Creditor’s rights against most 3rd parties
Automatic Perfection
Arises only for PMSI in consumer goods>Could loose to a good faith purchaser (you can win with filing)
Purchaser from merchant in ordinary course of business beats all security interest even if purchaser knows of them
57
which of the following requirements is
| necessary to have a security interest attach?
```
Debtor has rights in the
collateral: Yes
Proper filing of a security
agreement:No (Filing is for perfection. not for attachment)
Value given by the creditor:yes
```
58
Winslow Co., which is in the business of selling
furniture, borrowed $60,000 from Pine Bank.
Winslow executed a promissory note for that
amount and used all of its accounts receivable as
collateral for the loan. Winslow executed a security
agreement that described the collateral. Winslow
did not file a financing statement. Which of the
following statements best describes this
transaction?
Attachment of the security interest occurred
when the loan was made and Winslow
executed the security agreement
59
Grey Corp. sells computers to the public. Grey
sold and delivered a computer to West on credit.
West executed and delivered to Grey a promissory
note for the purchase price and a security
agreement covering the computer. West purchased
the computer for personal use. Grey did not file a
financing statement. Is Grey’s security interest
perfected?
Yes, because it was perfected at the time of
attachment
merchant
60
A financing statement must be filed before
| attachment of the security interest can occur.
No!
it usually after the attachment
61
On June 15, Harper purchased equipment for
$100,000 from Imperial Corp. for use in its
manufacturing process. Harper paid for the
equipment with funds borrowed from Eastern Bank.
Harper gave Eastern a security agreement and
financing statement covering Harper’s existing and
after-acquired equipment. On June 21, Harper was
petitioned involuntarily into bankruptcy under
Chapter 7 of the Federal Bankruptcy Code. A
bankruptcy trustee was appointed. On June 23,
Eastern filed the financing statement. Which of the
parties will have a superior security interest in the
equipment?
Eastern, because it perfected its security
interest within the permissible time limits(20 days)
special rule:For non-inventory collateral: Need only file within 20 days of possession and
is retroactive to the date of debtor possession
62
Wine purchased a computer using the
proceeds of a loan from MJC Finance Company.
Wine gave MJC a security interest in the computer.
Wine executed a security agreement and financing
statement, which was filed by MJC. Wine used the
computer to monitor Wine’s personal investments.
Later, Wine sold the computer to Jacobs, for
Jacobs’ family use. Jacobs was unaware of MJC’s
security interest. Wine now is in default under the
MJC loan. May MJC repossess the computer from
Jacobs?
Yes, because MJC’s security interest was
perfected before Jacobs’ purchase
Jacob purchased from Wine, who is not a merchant. it's not in course of normal business.
and MJC filed the financing statement before J purchased.
(if it's not filed, J could retain)
63
Larkin is a wholesaler of computers. Larkin
sold 40 computers to Elk Appliance for $80,000.
Elk paid $20,000 down and signed a promissory
note for the balance. Elk also executed a security
agreement giving Larkin a security interest in Elk’s
inventory, including the computers. Larkin
perfected its security interest by properly filing a
financing statement in the state of Whiteacre. Six
months later, Elk moved its business to the state of
Blackacre, taking the computers. On arriving in
Blackacre, Elk secured a loan from Quarry Bank
and signed a security agreement putting up all
inventory (including the computers) as collateral.
Quarry perfected its security interest by properly
filing a financing statement in the state of Blackacre.
Two months after arriving in Blackacre, Elk went
into default on both debts. Which of the following
statements is correct?
Larkin’s security interest is superior even
though at the time of Elk’s default Larkin had
not perfected its security interest in the state of
Blackacre.
(Grace period is 4 months.
64
Drew bought a computer for personal use from
Hale Corp. for $3,000. Drew paid $2,000 in cash
and signed a security agreement for the balance.
Hale properly filed the security agreement. Drew
defaulted in paying the balance of the purchase
price. Hale asked Drew to pay the balance. When
Drew refused, Hale peacefully repossessed the
computer.
Q.Under the UCC Secured Transactions Article,
which of the following rights will Drew have?
A.Force Hale to sell the computer
Q.Which of the following remedies will Hale have?
A.Obtain a deficiency judgment against Drew for
the amount owed
65
Thorp, CPA, was engaged to prepare tax returns and provide other tax services to Ivor Co. During the engagement, Thorp discovered that Ivor was selling worthless mortgages to investors. Ivor was indicted and Thorp was subpoenaed to testify at the criminal trial. Ivor claimed accountant-client privilege to prevent Thorp from testifying. Which of the following statements is true regarding Ivor's claim?
Ivor can claim an accountant-client privilege only in states that have enacted a statute creating such a privilege.
66
security agreement means
担保約定
PMSI:担保権
67
attachment 差し押さえ
以下3つの要件の全てを満たす。
Agreement 債務者と担保権者の合意
Value 担保権者が有償対価を提供
Right 債務者が担保財産に権利を有する
PMSI to personal > automatic perfection
68
Chapter 7 bankruptcy
debtor's asset are sold:Yes
Trustee:to resale assets and repay to creditor in priority order
Debt may be forgiven to the extent that sale of assets does not cover all loans.
Chapter 11 reorganization
debtor's asset are sold:No
Trustee:To work with the debtor to develop a repayment plan for all outstanding loans
Debt may be forgiven to the extent that sale of assets doesn't cover all loans
69
anyone can file voluntary petition of bankruptcy.
Involuntary bankruptcy:when debtor has unpaid liability, and
if creditor is less than 12,
one creditor must have more than 15,000USD unsecured claims
If creditor is 12
70
Preferential transfer:
| more than 5,000USD debt
* 90 days prior to bankruptcy
| * Insolvency: made transfer even when debtor has unpaid debt
71
Trustee cannot avoid
statutory lien(先取得権）other creditor already attached/perfected effective before the bankruptcy petition was filed
72
D has not been paying its business debts as they become due. if any creditor filed petitions and D opposed petition,
D will lose because it is not paying its debt as they become due.
73
Priority:
| secured creditor> alimony> trusty admin cost>salary>IRS back tax
rest of asset will be allocated to unsecured creditors proportionately.
74
Under the Secured Transactions Article of the UCC, what would be the order of priority for the following security interests in consumer goods?
I. Financing agreement filed on April 1.
II. Possession of the collateral by a creditor on April 10.
III. Financing agreement perfected on April 15.
c. I, II, III
When there are conflicting perfected security interests in the same collateral, the first creditor to file or to perfect has priority.
75
Principal can dismiss agent without cause, unless agency coupled with interest situation.
An agency coupled with an interest will be created any time the agent has either a property interest or a security interest in the subject matter of the agency.
76
An agent will usually be liable under a contract made with a third party when the agent is acting on behalf of
Disclosed principal: No third party will sue principal, not agent
Undisclosed principal: Yes Once disclosed, principal may be held liable. but till then, agent will be liable.
77
Property deeds are used to convey real property from a grantor (seller) to a grantee (buyer). For a deed to be legally operative,
it must include the identification of the grantor and grantee, and the adequate description of the property.
78
Long, Fall, and Pear own a building as joint tenants with the right of survivorship. Long gave Long's
Interest in the building to Green by executing and delivering a deed to Green. Neither Fall nor Pear
consented to this transfer. Fall and Pear subsequently died. After their deaths, Green's interest in the
building would consist of
A 1/3 interest as a tenant in common.
79
Kemp created and patented a new process to convert liquid gas to powder. Two years later, Mill
independently, and without knowledge of the Kemp patent, developed the identical process. Mill only
wanted to use the process for Mill’s own business and did not attempt to patent the process. Kemp
learned about Mill's process and sued for patent infringement. Will Kemp prevail?
Yes, because Kemp was the first to patent the process.
it doesn't matter if M knew or not, M intended to use for his own business or not. K has the only right to use.
80
Purchase price NEVER necessary on
deed 証書
81
The apparent authority of a partner to bind the partnership in dealing with third parties:
will be effectively limited by a formal resolution of the partners of which third parties are aware.
To prevent apparent authority from continuing when there is a limitation of a partner's actual authority, third persons with whom the partner deals must have knowledge of the limitation of his actualauthority or have received notification of the limitation, such as receiving an e-mail or fax or otherwise having the limitation brought to their attention.
82
```
In which type of business entity is the entire ownership most freely transferable?
A. Corporation.
B. General partnership.
C. Limited liability company.
D. Limited partnership.
```
A is corrent. The requirement is to identify the type of entity with entire ownership interest that is most freely transferable. A is corrent because a regular corporation generally has freely transferable stock.
83
For partnerships (GPs, LPs, LLPs, LLLPs), how do they allocate finances?
They automatically allocate income to partnerrs or members, and can elect single (pass-through) taxation. (*Remember: absent an agreement, partners share of profits and losses are equal)
84
Price owns 2,000 shares of Universal Corp.'s $10 cumulative preferred stock. During its first year of operations, cashdividends of $5 per share were declared on the preferred stock but were never paid. In the second year, dividends on the preferred stock were neither declared nor paid. If Universal is dissolved, which of the following statements is correct?
Universal will be liable to Price as an unsecured creditor for $10,000
After a dividend is declared but not paid on cumulative preferred stock, the unpaid dividend ranks with other "unsecured" debts
85
Commercial Papers are used for the specific deals, agreements or contracts intended between the parties.
Securities
are issued by stock exchanges to collect money for raising capital from general public that are tradable and transferable.
86
Under the Securities Act of 1933, which of the following statements most accurately reflects how
securities registration affects an investor?
The investor is provided with information on the principal purposes for which the offering's proceeds
will be used.
87
security Act 1933 section D
D-504 (5M,1 year, holding at least 1 year) and 506 (unlimited, no time limit, holding at least 1 year)
88
1933 > IPO
| 1934 > second market
1934 requires:
* Quarterly reports
* Proxy statements
* Report by any party making a tender offer to purchase the stock
* report of proxy solicitation
89
Adler, Inc. is a reporting company under the Securities Exchange Act of 1934. The only security it has issued is voting common stock. Which of the following statements is correct?
Persons who own more than 10% of a corporation's stock must file an annual report with the SEC.
90
Under Private security litigation reform act,
auditor need to report to PCAOB within one business day when they found illegal acts and reported to boards, and they haven't taken any remedial action.
91
Working papers:
The accountant owns the working papers but generally may not disclose them without the client s
consent or a court order.
92
formed contract=
there are privity between two parties.
93
A CPA is permitted to disclose confidential client information without the consent of the client to:
NO>Another CPA who has purchased the CPA's tax practice.
CPA cannot disclose client's information
94
* luck of due diligence
| * privity
Neither of these need to be proved under 1933 or 34
95
The tax preparer did not charge a separate fee for the tax return
preparation and paid the taxpayer the refund shown on the tax return less
a discount. The tax preparer negotiated the actual refund check for the
tax preparer’s own account after receiving power of attorney from the
taxpayer.
tax prepare won't receive tax payer's refund, or negotiate the refund check
96
Sale of real estate or Service contract requires
consideration for changing original contract
*Sales of goods contract doesn't require consideration for original contract modification!
97
The mortgagee(generally, bank) may assign the mortgage to a third party
without the mortgagor's (who borrows money from bank) consent.
98
Statements on Standards for Tax Services (SSTSs) have been issued by the Tax Executive Committee of the AICPA. The SSTSs
Are enforceable under the AICPA Code of Professional Conduct.
99
The Internal Revenue Code and the Regulations do not impose penalties on tax return preparers for which of the following?
Failure to notify a taxpayer about an inadvertent error on a tax return filed 10 years ago.
100
To which of the following rights is a holder of a public corporation's cumulative preferred stock always entitled?
Dividend carryovers from years in which dividends were not paid.
101
Long was a purchasing agent for Frost, a sole proprietor. Long had express authority to place purchase orders with Frost's suppliers. Long conducted business on the Internet and had little contact with Frost. After Frost was declared incompetent in a judicial proceeding, Long placed an order with Grant Corp. on Frost's behalf. Both Long and Grant were unaware of Frost's incompetence. Will Frost or Frost's legal representative be liable to Grant?
Both Long and Grant were unaware of frost's incompetence. Frost
or Frost's legal representative will not be liable because Long did not have
authority to enter into the contract.
102
Krete, an unmarried taxpayer with income exclusively from wages, filed her initial income tax return for Year 8. By December 31, Year 8, Krete's employer had withheld $16,000 in federal income taxes and Krete had made no estimated tax payments. On April 15, Year 9, Krete timely filed an extension request to file her individual tax return and paid $300 of additional taxes. Krete's Year 8 income tax liability was $16,500 when she timely filed her return on April 30, Year 9, and paid the remaining income tax liability balance.
What amount would be subject to the penalty for the underpayment of estimated taxes?
Zero
if the difference between your withholdings+estimated payments and your tax liability is less than 1000, there is no underpayment penalty. In this case the employer withheld 16,000, she made no estimated payments and the total tax liability was 16,500, so only 500 difference; < 1000 no penalty.
103
Vehicle actual expense
gas, oil,insurance, repair, tire,license,registration fee and dep.
parking fee, tolls for business use are separately deductible
104
A CPA must keep a complete copy of each return for
3 years
105
Which of the following acts by a CPA will not result in a CPA incurring an IRS penalty?
a. Failing, without reasonable cause, to provide the client with a copy of an income tax return
b. Failing, without reasonable cause, to sign a client's tax return as preparer
c. Understating a client's tax liability as a result of an error in calculation
d. Negotiating a client's tax refund check when the CPA prepared the tax return
c.Understating a client's tax liability as a result of an error in calculation
IRS does not impose penalty on a CPA for making an error in calculation
106
A CPA prepared a tax return that involved a tax shelter transaction that was disclosed on the return. In which of the following situations would a tax return preparer penalty not be applicable?
It is reasonable to believe that the position would more likely that not be upheld.
More likely than not situation>don't have to disclose.
107
If a CPA recklessly departs from the standards of due care when conducting an audit, the CPA will be liable to third parties who are unknown to the CPA based on
Gross negligence aka constructive fraud
108
Under the position taken by a majority of the courts, to which third parties will an accountant who negligently prepares a client's financial report be liable?
Any foreseen or known third party who relied on the report
109
Under the position taken by a majority of the courts, to which third parties will an accountant who negligently prepares a client's financial report be liable?
Under common law liability, a plaintiff must prove privity or equivalence of privity. The position of the majority of courts is that any intended or foreseen (but not merely foreseeable) third party beneficiary has the equivalence of privity.
110
Under common law, which of the following statements most accurately reflects the liability of a CPA who fraudulently gives an opinion on an audit of a client's financial statements?
The CPA probably is liable to any person who suffered a loss as a result of the fraud.
< > Negligence case, only to known users and those who should have known of them.
111
In a common law action against an accountant, lack of privity may be a viable defense if the plaintiff
Is the client’s creditor who sues the accountant for negligence
good defence of negligence >lack of privity
