SOLVED

[Travel Plans] Amina, a certified public accountant, is hired by Yuri to do an audit on his business. He tells her that the audit results will be used by him in an attempt to obtain a $10,000 loan, probably from Bank ABC. Later, however, Yuri changes his mind and uses the approved financial statements from Amina to get a loan for $100,000 from Bank XYZ. On the same day that she was hired by Yuri, Amina, who specializes in reviewing financial statements for companies seeking loans, was approached by Jonathan, who asked her to review his financial statements so that he could get a loan for $10,000 from an unspecified bank. Amina approved the statements, and he got a loan from Bank ABC. Additionally, Maggie requested that Amina review her financial statements so that she could get a loan of $25,000 from a rich uncle. Amina is a bit uneasy about Maggie because she believes that Maggie is somewhat untrustworthy. Therefore, Amina requires that Maggie agree in writing that the report will be transmitted only to the uncle, not to any other potential lenders. Amina approved the financial statements but, in fact, Maggie uses the approved statements to get a loan for $25,000 from Bank XYZ. During the time that she had set aside to audit and review the financial statements of Yuri, Jonathan, and Maggie, Amina was also preparing for an important trip. She was busy arranging transportation and accommodations for her stay. All of this negatively affected her work and she negligently approved all financial statements referenced. Unfortunately, Yuri, Jonathan, and Maggie ended up defaulting on the loans. The lenders sued Amina. 61) Under the Restatement Test, referenced in the text’s discussion of the case Bily v. Arthur Young & Co., which of the following is true regarding the effort by Bank XYZ to recover against Amina based upon Maggie’s default? A) The bank will be able to recover because it was in privity with Maggie, and Maggie was in privity with Amina. B) The bank will not be able to recover because it cannot establish reliance upon Amina’s work. C) The bank will be able to recover because it was in privity with Amina. D) The bank will be able to recover because Amina was aware that her audit would be used to obtain a loan. E) The bank will not be able to recover because Amina and Maggie had specifically agreed that the audit would only be used to obtain a loan from Maggie’s uncle. [Prenuptial Agreement] Norah performed accounting services for Joel’s used car business. She had a contract with Joel to the effect that she would audit his books and financial statements for his own use, not for the purpose of obtaining loans. In auditing Joel’s business, she developed various notes, calculations, memorandums, and other papers. Gloria, Joel’s fiancé, approached Norah to inquire about Joel’s business. Gloria and Norah had been friends for many years. Norah allowed Gloria to look at the various notes, calculations, and other papers resulting from her review of Joel’s financial statements and other records. Gloria told Norah that she really needed to investigate Joel because they were thinking of getting married, and she believed he had a legal obligation to disclose the information to her because of negotiations involving a prenuptial agreement. Norah agreed and proceeded to discuss Joel’s finances with Gloria, revealing all the information that Joel had disclosed to her. Gloria broke up with Joel, telling him that after what she discovered from Norah, she was concerned about Joel’s finances. Joel was very angry with Norah and told her that she was unethical and had violated the accountant-client privilege. 62) The notes, calculations, memorandums, and similar documents that Norah developed in her review of Joel’s financial statements are called which of the following? A) Working papers. B) Consultation papers. C) Review papers. D) Analysis papers. E) Computation papers. 63) What is Norah’s contract with Joel to do audit work for him called? A) Audit affirmation letter B) Absolute contract C) Retention contract D) Preview contract E) Engagement letter 64) Regarding Joel’s assertion that Norah violated the accountant-client privilege, which statement is accurate? A) Joel was correct because the accountant-client privilege is recognized in all states through statutory law. B) Joel was incorrect because there is no an accountant-client privilege in any state. C) Joel was correct since the accountant-client privilege exists in all states through common law. D) Joel was correct because the accountant-client privilege is recognized by federal law. E) More information is needed in order to know if Joel is correct because the accountant-client privilege is recognized in some states, but not in all states. 65) Assuming that Norah discussed with Gloria confidential communications that she had with Joel, which of the following is true regarding the ethical nature of that communication? A) Regardless of whether a state law existed providing an accountant-client privilege, federal statutory law deems such conduct unethical. B) Norah did not commit an ethical violation in disclosing information to Gloria unless there was a state law providing for an accountant-client privilege. C) Norah committed an ethical violation. D) Norah committed an ethical violation but only because Gloria was not yet married to Joel. E) Norah did not commit an ethical violation because negotiations regarding a prenuptial agreement were involved.  Â