[jeff]

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Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[REGTaker]

please say it is B.

[Anonymous]

Yes, guaranteed payments increase income but do nothing to the partner's basis. Think of it like income to the partner – that doesn't affect the basis.

[Anonymous]

You are correct! Please tell me why it's B. I said D.

[REGTaker]

In my own words I believe that the adding of the accessories is not a breach of contract. He performed the work in the contract and added some extras. Parc prevented him from completing the contract by canceling his services instead of telling him to stick to the rest of the contract and not to do anything extra. Because the work was substantially performed and he was more than willing to finish, he should have been paid for what he did.

[Anonymous]

I get it. I got the names mixed up. They should pay for the work he did because he didn't do anything materially wrong. Thank you.

[Anonymous]

Want me to post more of my mess ups? I got a 91% on my first testlet and they kept going down from there. Probably doesn't help that my two year old wanted some mommy-time.

[Anonymous]

While conducting an audit, Larson Associates, CPAs, failed to detect material misstatements included in its client's financial statements.

Larson's unqualified opinion was included with the financial statements in a registration statement and prospectus for a public offering of securities made by the client. Larson knew that its opinion and the financial statements would be used for this purpose.

In a suit by a purchaser against Larson for common law fraud, Larson's best defense would be that

A. Larson did not have actual or constructive knowledge of the misstatements.

B. Larson's client knew or should have known of the misstatements.

C. Larson did not have actual knowledge that the purchaser was an intended beneficiary of the audit.

D. Larson was not in privity of contract with its client.

[REGTaker]

A. Fraud requires intent and if he didn't have knowledge of the misstatements then he was acting in good faith and didn't intend to deceive anyone. I hope that's right.

[Anonymous]

You are awesome – totally right (especially the explanation). I don't know why I can't get that a defense against fraud is no knowledge of misstatements. I keep thinking it's related to privity somehow.

[Anonymous]

How about this one – Unless the partnership agreement prohibits it, a partner in a general partnership may validly assign rights to:

A Partnership property

B Partnership distributions

C Both

[REGTaker]

I can't think of which one is related to privity. I remember fraud requires intent and negligence best defense is to follow GAAS/GAAP, but I can't think of what requires privity.

[REGTaker]

I think it's just B. Once the property belongs to the partnership it can't be assigned to anyone else, but he can definitely assign his rights to the income to another person.

[Anonymous]

It's Ultramares – accountant is not liable to third party unless that party was an intended beneficiary. Privity of contract can be used as a defense against that.

[Anonymous]

That's correct!

[Anonymous]

Which of the following liens generally require(s) the lienholder to give notice of legal action before selling the debtor's property to satisfy the debt?

A. Mechanic's lien

B Artisan's lien

C. Both

[Author]

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