[kandisjoy]

These questions seem to contradict eachother.

First question:

Which of the following facts must be proven for a plaintiff to prevail in a common law negligent misrepresentation action?

A. The defendant made the misrepresentations with a reckless disregard for the truth.

B. The plaintiff justifiably relied on the misrepresentations.

C. The misrepresentations were in writing.

D. The misrepresentations concerned opinion.

My answer: A

The correct answer is B.

“The plaintiff does indeed have to rely on the misrepresentation as reliance is a necessary element of the case. If a plaintiff suffers no detriment by acting on the misrepresentation, no damages will result.”

Second question:

A client suing a CPA for negligence must prove each of the following factors except

A. Breach of duty of care.

B. Proximate cause.

C. Reliance.

D. Injury.

The correct answer is C.

“C is the best answer, for reliance is not an element of the negligence cause of action.”

So am I just crazy here? It seems like the first question is saying that reliance IS required in order to prove negligence, and then the second question says that’s it not. These are from CPAexcel, but are listed as straight from the AICPA’s released questions.

FAR: 71, 77
BEC: 70, 82
AUD: 62, 78
REG: 71, 68, 85

CA Licensed 11/2011

[Anonymous]

Could it be that in the first question the plaintiff is suing for “misrepresentation” specifically? As opposed to mere negligence, which could be lack of due care, failure to follow GAAP, etc?

In the second question it says that injury is required, how can the plaintiff be injured if he/she didnt rely on the information? Therefore, how can injury be required, but not reliance? Very confusing!

[Anonymous]

Could it be that in the first question the plaintiff is suing for “misrepresentation” specifically? As opposed to mere negligence, which could be lack of due care, failure to follow GAAP, etc?

In the second question it says that injury is required, how can the plaintiff be injured if he/she didnt rely on the information? Therefore, how can injury be required, but not reliance? Very confusing!

[kandisjoy]

I think you might be right about “misrepresentation” being the key word. I'm glad I'm not the only one confused here! Thanks for your response.

FAR: 71, 77
BEC: 70, 82
AUD: 62, 78
REG: 71, 68, 85

CA Licensed 11/2011

[kandisjoy]

I think you might be right about “misrepresentation” being the key word. I'm glad I'm not the only one confused here! Thanks for your response.

FAR: 71, 77
BEC: 70, 82
AUD: 62, 78
REG: 71, 68, 85

CA Licensed 11/2011

[rain11]

It has to do with the fact that one is suing a CPA versus the other just simply a negligent misrepresentation. Even if the person did not rely on CPA's misrepresentation, a CPA has a duty to perform with due care.

For example, if a person bought a stock in Corp A but did not rely on the financial statement negligently audited by a CPA, that person could still have damages (even if no reliance.) Therefore, this person can go after the CPA for negligence. Here, the CPA's only defense would be due care.

I agree though, the wording is so confusing. For me, the hardest part about REG is understanding what they're really asking because there are so many exceptions to the exception…. 🙁

I am studying with Becker and this information is all in the CPA liability section. I am taking the exam tomorrow… so hopefully I have this concept down!

FAR - 04/19/2011 - 89
AUD - 05/15/2011 - 91
BEC - 05/31/2011 - 89
REG - 7/02/2011 - TBD

[rain11]

It has to do with the fact that one is suing a CPA versus the other just simply a negligent misrepresentation. Even if the person did not rely on CPA's misrepresentation, a CPA has a duty to perform with due care.

For example, if a person bought a stock in Corp A but did not rely on the financial statement negligently audited by a CPA, that person could still have damages (even if no reliance.) Therefore, this person can go after the CPA for negligence. Here, the CPA's only defense would be due care.

I agree though, the wording is so confusing. For me, the hardest part about REG is understanding what they're really asking because there are so many exceptions to the exception…. 🙁

I am studying with Becker and this information is all in the CPA liability section. I am taking the exam tomorrow… so hopefully I have this concept down!

FAR - 04/19/2011 - 89
AUD - 05/15/2011 - 91
BEC - 05/31/2011 - 89
REG - 7/02/2011 - TBD

[kandisjoy]

Thank you for the explanation – that helped!

FAR: 71, 77
BEC: 70, 82
AUD: 62, 78
REG: 71, 68, 85

CA Licensed 11/2011

[kandisjoy]

Thank you for the explanation – that helped!

FAR: 71, 77
BEC: 70, 82
AUD: 62, 78
REG: 71, 68, 85

CA Licensed 11/2011

[kb24]

@kandiss

You're right – both of these questions are confusing.

In the first one, A isn't correct because the standard for misrepresentation is lack of reasonable care not reckless disregard for the truth. C and D are also wrong, so the only correct answer is B. However, that is a general requirement for negligence suits, not just misrepresentation.

In the second, A, B, and D are always required. While C is usually required, it's not for suits under section 11 of the 1933 securities act. So that makes it the best answer.

FAR 4/1/11 - 89
AUD 4/15/11 - 85
REG 4/29/11 - 80
BEC 5/13/11 - 85

[kb24]

@kandiss

You're right – both of these questions are confusing.

In the first one, A isn't correct because the standard for misrepresentation is lack of reasonable care not reckless disregard for the truth. C and D are also wrong, so the only correct answer is B. However, that is a general requirement for negligence suits, not just misrepresentation.

In the second, A, B, and D are always required. While C is usually required, it's not for suits under section 11 of the 1933 securities act. So that makes it the best answer.

FAR 4/1/11 - 89
AUD 4/15/11 - 85
REG 4/29/11 - 80
BEC 5/13/11 - 85

[incrediboys]

I found this, and for this I register the account here

Negligence and negligent misrepresentation are important legal concepts that all professionals should be aware of because they can give rise to liability when all of their constituent elements are present in a particular situation. A successful action in negligence requires the following elements: 1. a duty of care between the parties, 2. a breach of that duty, and 3. damage resulting from that breach. The following are required elements for a successful action for negligent misrepresentation: 1. there must be a duty of care based on a ‘special relationship' between the representer and the representee, 2. the representation must be untrue, inaccurate or misleading, 3. the representer must have acted negligently in making the representation, 4. the representee must have relied, in a reasonable manner, on the negligent misrepresentation, and 5. the reliance must have been detrimental to the representee in the sense that damages resulted.

[incrediboys]

I found this, and for this I register the account here

Negligence and negligent misrepresentation are important legal concepts that all professionals should be aware of because they can give rise to liability when all of their constituent elements are present in a particular situation. A successful action in negligence requires the following elements: 1. a duty of care between the parties, 2. a breach of that duty, and 3. damage resulting from that breach. The following are required elements for a successful action for negligent misrepresentation: 1. there must be a duty of care based on a ‘special relationship' between the representer and the representee, 2. the representation must be untrue, inaccurate or misleading, 3. the representer must have acted negligently in making the representation, 4. the representee must have relied, in a reasonable manner, on the negligent misrepresentation, and 5. the reliance must have been detrimental to the representee in the sense that damages resulted.

[Not a Quitter]

Wow, thank you incrediboys for taking the time to post on this old thread. I m studying for REG right now and this is a concept that keeps tripping me up. Thanks again.

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Not a Quitter]

Wow, thank you incrediboys for taking the time to post on this old thread. I m studying for REG right now and this is a concept that keeps tripping me up. Thanks again.

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Author]

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