Agency and Employment
Liability of Principals and Agents
LLC's and LLP's
Accounting Profession
Accounting Profession 2
100
What kind of relationship allows an employee act on the principals behalf?
Principal-Agent Relationship
100
True or False: Generally, a real estate agent can sell his or her own house to the principal with whom they are dealing
False
100
True or false: In a member-managed LLC,a member who contributed $ 50,000 in capital has more rights in the management of the business of the LLC than a member who contributed $ 10,000.
False
100
A form of partnership in which all partners are limited partners. (Most public accounting firms are operated as this type of partnership.)
LLP
100
This auditor's opinion finds the company's financial statements fairly represent the company's financial position completely
Unqualified
200
List the type of Agency Relationships
Express, Implied, Incidental, Apparent, Ratification
200
A sales person that works for a company is getting groceries on his way to work when he causes an accident by his own negligence. Is the company he works for liable? What is this an example of?
No. The coming and going rule.
200
A form of partnership in which all partners are limited partners and there are no general partners is an example of_________.
Limited Liability Partnership
200
CPAs must comply with which two uniform standards of professional conduct?
GAAPs and GAASs
200
A rule that says that an accountant is liable for negligence to third parties who are foreseeable users of the client’s financial statements.
Forseeability Standard
300
A principal owes a duty to reimburse the agent if they agent was: (List the 3 requirements)
1) Authorized by the principal 2) Within the scope of the agency 3) Necessary to discharge the agents duties in carrying out the agency
300
An agency in which a contracting third party knows that the agent is acting for a principal and knows the identity of the principal is called what?
Fully Disclosed Agency
300
When an LLC is an at-will LLC and when it is a term LLC.
An LLC is an at-will LLC when it has not specified term of duration. An LLC is an a term LLC when has a specified term of duration
300
What are the 3 auditor’s opinions?
1) Unqualified opinion 2) Qualified opinion 3) Adverse opinion
300
What are the three major rules of liability that a state can adopt in determining whether an accountant is liable in negligence to third parties?
Ultramares Section 552 Restatement of Torts Forseeability
400
What are the agent’s 3 duties to a principal?
Duty to perform, Duty to notify, Duty to Account
400
What are the two tests to determine if a principal is liable for the intentional tort of their agent?
-Motivation Test, Work Related Test
400
List 4 possible forms of a member’s capital contribution to an LLC.
Money, personal property, real property, other tangible property , intangible property (patent), services performed, contracts for services to be performed, promissory notes, or other agreements to contribute cash or property.
400
Accountants can be found liable to their clients under which legal theories?
Breach of Contract, Fraud, Negligence
400
A state law that provides that an accountant cannot be called as a witness against a client in a court action
Accountant-Client Privilege
500
In what circumstances are agency contracts terminated by Law?
Death, Bankruptcy, War, Insanity
500
Name and briefly describe the 5 violations of an Agent’s duty of Loyalty to Principal
- Self-Dealing o Agents are prohibited from undisclosed self-dealing with the principal. o If there has been this dealing, the principal can rescind the purchase and recover money paid to the agent. - Usurping opportunity o An agent cannot personally usurp an opportunity that belongs to the principal. Third party offers must be conveyed to the principal - Competing with the principal o Agents are prohibited from competing with the principal during the course of an agency unless the principal agrees - Misuse of confidential information o Agent is under legal duty not to disclose or misuse confidential information either during or after the course of the agency o Principal can recover damages, lost profits, etc. - Dual agency o Agent cannot meet a duty of loyalty to two parties with conflicting interests
500
Who has the authority to bind an LLC to contracts in a member-managed LLC? In a manager-managed LLC?
In a member-managed LLC all members have agency authority to bind the LLC to contracts. In a manager –managed LLC, the managers have authority to bind the LLC to contracts, but non-managers cannot bind the LLC to contracts.
500
: A public accounting firm engaged in fraudulent practices and reported inflated earnings to conceal losses. Which act tries to prevent these practices? Provide at least 3 features of the act.
1)Sarbanes-Oxley Act • Public Company Accounting Oversight Board (PCAOB) • Public Accounting Firms Must Register with the PCAOB • Audit and Nonaudit Services • Audit Report Sign-Off • Certain Employment Prohibited • Audit Committee
500
The Tax Reform Act of 1976 is an act that imposes criminal liability on accountants and others who prepare federal tax returns if they…?
Willfully understate a client’s tax liability Negligently understate the tax liability Aid or assist in the preparation of a false tax return
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