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BUSFIN 4510 MIDTERM STUDY GUIDE
Malpractice actions - Answer -Actions brought against attorneys, lawyers, real estate brokers,
doctors, architects and other professionals.
Negligence - Answer -Fails to exercise the care of a competent professional and that failure
causes loss or injury to the client.
Unaudited financial statement - Answer -No or insubstantial accounting procedures were used
in compilation of document.
Constructive fraud - Answer -Fraud without fraudulent intent.
Privity of contract - Answer -Client and anyone for whose "primary benefit" the accounting
statements were prepared.
Restatement rule - Answer -Accountant is liable to known third-party users of the accountant's
work product and also to those in the limited class who whose reliance on the work the
accountant specifically foresaw.
Reasonably foreseeable users test - Answer -Accountant is liable to any third party who was or
should have been foreseen as a possible user of the accountant's work product and who did in
fact use and rely on that work product for a proper business purpose.
Working papers - Answer -Various documents used and developed during an audit, including
notes, calculations, copies, memorandums and other papers constituting the accountant's work
product.
Accountant-client privilege - Answer -Right of an accountant to refuse to reveal any information
given to him during the course of providing accounting services to a client
Securities Act of 1933 - Answer -Accountants are civilly liable for misstatements and omissions
of material facts made in registration statements the SEC requires.
Securities Exchange Act of 1934 - Answer -Imposes liability for making fraudulent statements to
the SEC. Requires a higher burden of proof. Must prove: false and misleading statement
affected the price and reliance was placed on the false or misleading statement without
knowledge of its inaccuracy.
Section 10(b) - Answer -Unlawful for accountants to use "any manipulative or deceptive device
or contrivance in contravention of such rules and regulations as the [SEC] may prescribe as
necessary or appropriate in the public interest or for the protection of investors.
Intellectual property - Answer -Fruit's of someone's mind (mental creativity).
Trademark - Answer -Distinctive mark, word, design, picture or arrangement used with a
product that helps consumers identify the product with the producer.
Trade dress - Answer -Overall appearance and image of a product that has acquired secondary
