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Law
Q:
Accountants may be subject to criminal penalties for violations of federal securities laws.
Q:
A tax preparer that fails to give a taxpayer a copy of his or her tax return may be subject to a penalty under the Internal Revenue Code.
Q:
An accountant's liability under the Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 requires privity of contract.
Q:
An accountant is not liable for a misleading statement that affects the price of a security if the accountant acted in good faith.
Q:
An accountant who prepares a financial statement in good faith may avoid liability under Section 18 of the Securities Exchange Act of 1934.
Q:
An accountant is not liable for a misstatement to a purchaser of securities who knew of the misstatement but invested anyway.
Q:
A failure to follow generally accepted accounting principles and generally accepted auditing standards is proof of a lack of due diligence.
Q:
An accountant's liability under the Securities Act of 1933 requires privity of contract with the purchaser of a security.
Q:
Under the Sarbanes-Oxley Act of 2002, accountants must retain working papers relating to an audit or review for a certain period of time.
Q:
Working papers are the documents through which a court orders an accountant to audit a public company.
Q:
An accountant's working papers are the documents that are used and developed during an audit.
Q:
The Sarbanes-Oxley Act of 2002 applies to domestic, but not foreign, public accounting firms that provide auditing services to "issuers."
Q:
An attorney may be liable in negligence to any third party who the attorney knows will rely on the attorney's work.
Q:
An attorney may be liable to a third party who relies on the attorney's legal opinion to the third party's detriment.
Q:
Under the Restatement (Third) of Torts, accountants can be held liable for negligence to any third parties.
Q:
In most courts, auditors cannot be held liable to third parties for negligence in the performance of their duties.
Q:
If a third party will be affected by a contract, the parties to the contract are in privity with the third party.
Q:
A professional's gross negligence in performing a duty constitutes actual fraud.
Q:
A professional can be liable for fraud whether or not he or she acted with fraudulent intent.
Q:
Malpractice is professional negligence.
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Under rules of professional misconduct, an attorney should not engage in conduct involving deceit.
Q:
Each state establishes rules that govern the conduct of attorneys.
Q:
A client's negligence is never a defense to a charge of negligence against an accountant.
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An accountant can avoid liability by proving that his or her negligence was only the proximate cause of the client's loss.
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Attorneys are required to be familiar with well-settled principles of law applicable to a case.
Q:
An opinion that disclaims any liability for false or misleading financial statements is too general.
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A qualified opinion must be specific and identify the reason for the qualification.
Q:
An accountant normally will be held liable to the client for incorrect judgment.
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Generally, an accountant must exercise the degree of care that an ordinarily prudent accountant would exercise.
Q:
Accountants and other professionals may not be held liable for negligence in the performance of their service.
Q:
An accountant is required to discover every impropriety, defalcation, and fraud in a client's books.
Q:
Accountants and other professionals do not face liability under the common law for any breach of contract.
Q:
Professionals are obligated to adhere to standards of performance generally accepted within their profession.
Q:
If no children or grandchildren survive a decedent who dies without a will, a surviving spouse is entitled to the entire estate.
Q:
A will is probated in part to establish its validity.
Q:
A divorce necessarily revokes an entire will.
Q:
To "publish" a will means to release it to the media.
Q:
A nuncupative will is a will that is completely in the handwriting of the testator.
Q:
An "X" can qualify as a signature on a will.
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A will must normally be attested to by two or three witnesses.
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Undue influence can occur when a named beneficiary is in a position to influence the making of a will.
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To execute a valid will, a testator must remember the "natural objects of his or her bounty."
Q:
In most states, a person must be sixteen years of age to execute a valid will.
Q:
A testator is a decedent who dies without a will.
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An executor is a personal representative appointed by a court for a decedent who dies without a will.
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If no heirs are found, the property of a decedent is transferred to a charitable organization.
Q:
An insured's lack of an insurable interest is an absolute defense against payment.
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Because insurance law follows contract law, bad faith tort actions against insurers are not allowed.
Q:
In defense against payment, an insurance company can raise any of the defenses that would be valid in an ordinary action on a contract.
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An insurer has a duty to avoid the payment of claims.
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An applicant for insurance has a duty to disclose only material facts that the insurer asks for.
Q:
The words used in an insurance contract are interpreted against the party who applied for the policy.
Q:
A coinsurance clause provides that two or more people will be covered by the same life insurance policy.
Q:
State law may mandate that an incontestability clause be included in an insurance policy.
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Insurance coverage is never effective until a formal written policy is issued.
Q:
If a life insurance applicant pays a premium but dies before the physical exam, there is obviously no coverage.
Q:
A loss sustained between the time of application and the delivery of an insurance policy may not be covered.
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An insurance application is part of the insurance contract.
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A party must own property to have an insurable interest in it.
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A person can insure anything in which he or she has an insurable interest.
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Insurance is classified according to the amount of the payment on a claim.
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The consideration paid to an insurer to obtain an insurance policy is the premium.
Q:
A business firm may have an insurable interest in the life of any of its employees, except a key employee.
Q:
Liability insurance protects against liability imposed on the insured as a result of injuries to the person or property of another.
Q:
Dieter's will provides for a distribution of his assets on his death. Who will "distribute" Dieter's property, and what are the steps involved?
Q:
Patty, who is divorced, owns a house. She has no reasonable expectation of benefit from the life of Quinn, her ex-spouse, but she applies for insurance on his life anyway. She also obtains a fire insurance policy on the house, which she later sells. Five years later, Quinn dies and the house is destroyed in a fire. Can Patty obtain payment on either the death of Quinn or the loss of the house? Explain.
Q:
Mason creates a trust to prevent his son, Newt, the beneficiary, from assigning his rights to future payments of income from the trust. This is
A.a charitable trust.
B.a constructive trust.
C.a spendthrift trust.
D.an illegal trust.
Q:
Benny dies without a will, with no surviving spouse or child. Benny's survivors include his granddaughter Callie, his nephew Duncan, and his cousin Earl. In most states, his estate would pass to
A.Callie.
B.Duncan.
C.Earl.
D.the state.
Q:
Cliff dies without a will. His survivors include his spouse Dana and his two children, Efrem and Fay. Under applicable laws, Dana will probably receive
A.all of Cliff's estate.
B.none of Cliff's estate.
C.one-half of Cliff's estate.
D.one-third of Cliff's estate.
Q:
Orin creates a living trust to pass his assets, including stock in Petro Oil Company and other business investments, to his heirs. One advantage of this arrangement is that
A.income taxes do not have to be paid on trust earnings.
B.the assets are sheltered from the payment of estate taxes.
C.the assets can be transferred without going through probate.
D.the trust does not come into existence until the grantor's death.
Q:
Sherman dies without a will, survived by his granddaughter Roxy and Roxy's brother Pio. Roxy and Pio are Sherman's
A.collateral heirs.
B.settlors.
C.trustees.
D.lineal descendants.
Q:
Dyan executes her will to give "to my nephew Esau my stock in Fargo, Inc." Later, Dyan writes separately, with the same formalities required for a will, to leave the stock to her niece Ginny and cash to Esau. This writing
A.does not affect the will's gift of the stock to Esau.
B.requires a gift of the stock in equal shares to Esau and Ginny.
C.revokes the whole will, which must be redrafted.
D.revokes the will's gift of the stock to Esau.
Q:
Amelia executes a separate written instrument to amend her prior will. This separate document is
A.a codicil.
B.a holographic will.
C.a living will.
D.a nuncupative will.
Q:
Ratzo is asked to be a witness to Sade's will. Before attesting to the will,
A.Ratzo does not have to read the will or be informed of its contents.
B.Ratzo must read the will and recite its contents.
C.Sade must orally tell Ratzo of the will's contents.
D.Sade's attorney must read the will aloud to Ratzo.
Q:
Lani is asked to serve as a witness to Mona's will. To qualify, Lani must be
A.a collateral heir.
B.a lineal descendant.
C.eighteen years of age or older.
D.mentally competent.
Q:
Juli types onto a computer what she intends to be "My Will" and prints it out. Juli has capacity. "My Will" is
A.invalid.
B.valid if Juli signs it.
C.valid if Juli signs it and has three witnesses sign it.
D.valid if Juli signs it, has three witnesses sign it, and files it in a certain state office.
Q:
Lost in a canyon near Gila, Arizona, Hester writes her will in crayon, on a paper bag, while Ivan states orally how he wants his estate distributed. Most states do not permit
A.an olographic will.
B.a nuncupative will.
C.a will written on a paper bag.
D.a will written in crayon.
Q:
Eighty-year-old Clark exhibits confusion, forgetfulness, and disorientation. Dave, Clark's doctor, believes that the symptoms indicate dementia. Elsa, who has significant contact with Clark, believes that he is in a state of mental decline. These facts indicate
A.an urgency that Clark distribute his assets.
B.Clark's lack of capacity.
C.Dave's misdiagnosis.
D.Elsa's intent to take advantage of Clark.
Q:
Gigi, a twenty-year-old, wants to execute a will before she undertakes a mountain-climbing trip on a peak in the Himalaya Mountains. In most states, the legal age for executing a will is
A.sixteen years of age.
B.eighteen years of age.
C.twenty-one years of age.
D.twenty-five years of age.
Q:
The assets in Hong's estate, including the value of his home on Elm Street and its contents, are insufficient to pay in full all of the gifts provided for in his will. His heirs will receive
A.full payment in order of seniority until the assets are exhausted.
B.nothing-the assets will descend to the state.
C.reduced benefits.
D.the option of distributing the assets according to their wishes.