SOLVED

81) An insurance policy that covers a person for errors or omissions made in the course of carrying out his or her professional responsibilities is sometimes referred to as a[n] ________. A) errors and omissions policy. B) deductible policy. C) professional indemnification and malpractice policy. D) professional errors policy. E) professional malpractice policy. 82) Section 11 of the Securities Act creates a duty for accountants to perform their tasks with ________. A) due diligence. B) reasonableness. C) no errors or omissions. D) accuracy and efficiency. E) efficiency. [BigCom Securities] A&Z and DCB, two large accounting firms, prepared registration statements for BigCom, a large, public company, and provided information on BigCom to the SEC. A&Z’s statements contained several misrepresentations about BigCom’s securities. Wallace, BigCom’s Chairman of the Board of Directors, signed the statements prior to the SEC filing. As is the usual procedure, Wallace signed the statements but did not read them carefully. He heard there were some questionable issues about the quality of the statements, but he felt confident with the expertise of the large accounting firms. Subsequently, purchasers of BigCom claimed there were misrepresentations about BigCom’s shares in the statements filed with the SEC, and sued A&Z, DCB, and Wallace. All three defendants deny liability. 83) Would DCB likely be held liable for the misrepresentations in the statements filed with the SEC? A) Yes, unless DCB can prove the misrepresentation did not involve a material fact. B) No, because it was not a willful violation. C) Yes, based on a balancing test. D) No, because the misrepresentations were made by A&Z and an accounting firm cannot be held liable for something it did not do. E) Yes, unless DCB can prove it performed a due diligence inquiry. 84) Wallace claims that he should not be liable because he relied on the accounting firms’ expertise with regard to the registration statements. Is Wallace correct? A) No, as a director, Wallace cannot use a defense of reliance because he was aware of questionable issues in the statements. B) Yes, but only if the accounting firm performed a due diligence inquiry. C) No, because he is a director. D) Yes, directors are not required to perform a due diligence inquiry if another expert compiles the statement. E) Yes, reliance is a valid defense where a director is involved. 85) Wallace was also charged under Section 15 of the Securities Act. He asserted an affirmative defense claiming he is not liable as he is not a “controlling person” under that statute. Is he correct? A) No, as chairman of the board of directors, he is a “controlling person” B) No, because members of a board of directors can only be considered “controlling persons” if they had responsibility for due diligence. C) Yes, if he did not have ultimate responsibility to conduct due diligence. D) Yes, because he is not an accountant or other financial expert. E) Yes, even though he was chairman of the board, he did not control the content of the registration statements. 86) A[n] ________ liability insurance policy can protect a company doing business in the cloud. A) Storage B) Cloud C) Online D) Cyber E) Data  Â