Section 1: 10–20%R3
Legal Duties and Liability of Tax Practitioners
Exam Insight
The exam tests how far an accountant's liability reaches — to clients, to known third parties, or to anyone foreseeable — and the sharp contrast between the 1933 Act (no reliance or negligence to prove) and the 1934 Act (scienter required). The limited §7525 privilege and working-paper ownership round out a high-yield topic.
CPA Exam Lab is an independent study resource and is not affiliated with, endorsed by, or sponsored by the AICPA® or NASBA. Practice questions are original content created for study purposes. “CPA” is a registered trademark of the AICPA.
What AICPA Wants You to Know
- 1Identify an accountant's common-law liability to clients for breach, negligence, and fraud
- 2Contrast the privity, foreseen-user (Restatement), and reasonably-foreseeable third-party standards
- 3Apply Securities Act of 1933 §11 liability and the due-diligence defense
- 4Apply Securities Exchange Act of 1934 §10(b)/Rule 10b-5 and the scienter requirement
- 5Explain the limited §7525 tax-practitioner privilege and its exceptions
- 6State who owns working papers and key Sarbanes-Oxley implications