Page |1
CPA - Ethics Questions and Correct
Answers/ Latest Update / Already Graded
Clients may recover from breach of contract if:
Ans: *Accountant agreed to perform services professionally
*Accountant breached agreement
*Client suffered damages, and
*Breach proximately caused the damages
Recovery of fee for Breach of Contract
Ans: *Can't recover if major breach
*Recoverable minus damages if it was minor
Damages that clients can recover for Breach of Contract or Negligence
Ans: Compensatory, not punitive
Clients may recover for negligence if:
All rights reserved © 2025/ 2026 |
, Page |2
Ans: *Accountant owed a duty of due care
*Accountant breached the duty
*Client suffered damages, and
*Breach proximately caused the damages
Standard for Negligence
Ans: That degree of judgment and skill possessed by a
reasonable accountant under all the circumstances.
Fraud Liability for 3rd parties
Ans: *Accountant misrepresented a fact (or failed to disclose)
*Accountant acted with Scienter (intent to deceive)
*Plaintiff relied on false stmt or omission
*Damages
*Proximate cause
All rights reserved © 2025/ 2026 |
, Page |3
Actual vs. Constructive Fraud
Ans: Actual Fraud- acct knows stmt is false
Constructive Fraud- acct has no reasonable grounds to believe
the stmt is true (signing off on FS audit w/o auditing)
Damages recoverable under Fraud cases
Ans: Compensatory AND Punitive damages
Constructive Fraud
Ans: Reckless disregard or Gross Negligence
Restatement of Torts rule (Majority rule)
Ans: 1)Information being supplied to the client will be given to
or is for the benefit of a LIMITED GROUP of third persons
2)The information will influence those third persons in a
specific transaction or type of transaction
The Reasonable Foreseeability Approach
All rights reserved © 2025/ 2026 |
CPA - Ethics Questions and Correct
Answers/ Latest Update / Already Graded
Clients may recover from breach of contract if:
Ans: *Accountant agreed to perform services professionally
*Accountant breached agreement
*Client suffered damages, and
*Breach proximately caused the damages
Recovery of fee for Breach of Contract
Ans: *Can't recover if major breach
*Recoverable minus damages if it was minor
Damages that clients can recover for Breach of Contract or Negligence
Ans: Compensatory, not punitive
Clients may recover for negligence if:
All rights reserved © 2025/ 2026 |
, Page |2
Ans: *Accountant owed a duty of due care
*Accountant breached the duty
*Client suffered damages, and
*Breach proximately caused the damages
Standard for Negligence
Ans: That degree of judgment and skill possessed by a
reasonable accountant under all the circumstances.
Fraud Liability for 3rd parties
Ans: *Accountant misrepresented a fact (or failed to disclose)
*Accountant acted with Scienter (intent to deceive)
*Plaintiff relied on false stmt or omission
*Damages
*Proximate cause
All rights reserved © 2025/ 2026 |
, Page |3
Actual vs. Constructive Fraud
Ans: Actual Fraud- acct knows stmt is false
Constructive Fraud- acct has no reasonable grounds to believe
the stmt is true (signing off on FS audit w/o auditing)
Damages recoverable under Fraud cases
Ans: Compensatory AND Punitive damages
Constructive Fraud
Ans: Reckless disregard or Gross Negligence
Restatement of Torts rule (Majority rule)
Ans: 1)Information being supplied to the client will be given to
or is for the benefit of a LIMITED GROUP of third persons
2)The information will influence those third persons in a
specific transaction or type of transaction
The Reasonable Foreseeability Approach
All rights reserved © 2025/ 2026 |
