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 the topic.

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

Patterns in this topic

The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.

The Accountant Liability TestTwo questions decide it: how far the negligence standard reaches, and which securities act sets the plaintiff's burden.

Exam tip

Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.