Flashcards in Deck 23 Deck (20):
Ultramares limits the accountant's liability for negligence to:
(i) parties in privity and (ii) intended third party beneficiaries; parties who are merely "foreseen" cannot recover.
Knew the statement was wrong or recklessly disregarded the truth (intent to deceive)
Under rule 10b-5, a purchaser must prove:
Scienter (intent to deceive or gross negligence, which is the reckless disregard for the truth); plaintiff relied on the misstatements; and LAM
Under section 11, what must be proven?
The plaintiff acquired the security, there was a material misstatement in the financial statements, and the plaintiff suffered a loss (do not have to prove reliance or fraud)
Negligence has 4 elements:
duty of care, breach (which is a lack of due care), causality of injury, and damages
5 elements of fraud:
1) misrepresentation of material fact, 2) intent to deceive, 3) actual and justifiable reliance on the misrepresentation, 4) and intent to induce that reliance, and 5) damages
CPA legal liability can arise from 3 things:
1) breach of contract, 2) tort (negligence, fraud, or constructive fraud), or 3) violation of a statute
Failure to exercise reasonable care
Elements of actual fraud (MAIDS)
Misrepresentation of material fact; intent to deceive; actual reliance; induce plaintiff; and damages
Elements of constructive fraud
The defendant acts recklessly (gross negligence)
When is privity not a defense?
Not a defense to fraud (it is a defense for negligence)
Best defense for fraud:
lack of scienter/good faith
Best defense for negligence:
Best defense for breach of contract:
The client hindered my performance
What do you have to prove under section 11? "LAM"
suffered a Loss, Acquired the stock, and Material misrepresentation
Rule 10b-5 relates to:
The method used to depreciate partnership property is an election made by:
The partnership and may be any method approved by the IRS
The standard deduction for a trust or an estate in the fiduciary income tax return is:
Does the collection of life insurance proceeds have an effect on taxable income?