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CPA REG Business Law, Ethics, And Professional Responsibilities
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CPA Business Law, Ethics, and Professional Responsibilities (often covered in the REG and AUD sections) require upholding integrity, objectivity, competence, and confidentiality to protect the public interest. CPAs must navigate legal regulations, tax procedures, and strict ethical codes, avoiding conflicts of interest and ensuring compliance with professional standards.  Core Ethical Principles (AICPA/IESBA) Integrity: Being honest and transparent in financial reporting. Objectivity: Remaining free from bias or conflicts of interest. Professional Competence and Due Care: Maintaining... Show more
CPA REG Business Law, Ethics, And Professional Responsibilities
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23 Questions

1. Which is correct regarding contract law?
I. A legally enforceable agreement can result even if an offer is not accepted.
II. A contract can be for any legal purpose.
2. Dave negotiated the sale of his bagel store to Ed. Ed asked to see the prior year’s financial statements. Using the store’s checkbook, Dave prepared a balance sheet and profit and loss (P&L) statement as well as he could. Dave told Ed to go have an accountant examine it, as Dave is not an accountant. Ed later learned that the financial statements contained several errors that resulted in material overstatement of assets and net income. Dave was not aware of the errors. Ed sued Dave for fraud claiming that Ed relied on the financial statements in making the decision to buy the bagel store. Which is correct?
3. Todd Winger, 15 years old, signs a contract to receive flying lessons at a local airport. It’s legal in Todd’s state for a minor to take flying lessons as early as age 14. Todd’s parents drive him to the weekly lesson, the flight school gets paid each month, and Todd continues to show up for the weekly lessons for an entire year. Which of the following is correct?
4. Which of the following communications sent by an offeree must be received to be effective?
I. Counteroffers
II. Rejections
5. Which of the following contracts if not fully performed must be in writing to be enforceable?
I. Sale of goods for a price of $1,500
II. Executor of a will
III. A contract to cosign the debts of another
6. Conisha contracted with White for Conisha to buy certain real property. If the contract is otherwise silent, Conisha’s rights under the contract are:
7. Hayes agreed orally to repair Patterson’s rare guitar for $389. Before the work was started, Patterson asked Hayes to perform additional repairs to the instrument and agreed to increase the contract price to $625. After Hayes completed the work, Patterson refused to pay and Hayes sued. Patterson’s defense was based on the statute of frauds (the contract was oral). What total amount will Hayes recover?
8. Black Bear, Inc., made a contract in writing to hire Ditka for five years for $150,000 per year. After two years, Ditka asked Black Bear, Inc., for a raise of $20,000 per year. Black Bear, Inc., at first refused but then agreed after Ditka put on some pressure. After the fifth year, Ditka left and Black Bear, Inc., sued to get back the extra $20,000 per year for the last three years. Who wins?
9. Micki received an offer from Clark, Inc., that contained the following specific instructions: “We need to know soon whether you can agree to the terms of this proposal; you must accept by September 22 or we will assume you cannot meet our terms.” If Micki’s letter of acceptance is mailed by September 21 and arrives on September 25:
10. Which of the following contracts are voidable?
I. Contracts entered into by a minor
II. Contracts entered into by an individual who is drunk every day
11. An offer that is irrevocable for an agreed time and is supported by consideration:
I. is called an option or an option contract
II. is NOT allowed in a real estate contract
12. Which is correct regarding consideration as an element of a contract?
I. Consideration can involve money or goods but not services.
II. Consideration is something that is bargained for and exchanged in a contract.
13. Which of the following would NOT be prohibited by the parol evidence rule?
I. Oral evidence that existed prior to the writing that could prove fraud
II. Written evidence that existed prior to the writing that could prove fraud
14. On November 20, Sheran, Inc., an appliance dealer, placed a television advertisement stating that Sheran would sell 300 high-end smartphones at its store for a special discount only on November 25, Year 13. On November 22, Ragofsky called Sheran and expressed an interest in buying one of the advertised phones.
Ragofsky was told that there will probably be long lines and to come to the store as early as possible.
Ragofsky went to Sheran’s store on November 25 and demanded the right to buy the phone at the special discount.
Sheran had sold the 300 phones and refused Ragofsky’s demand.
Ragofsky sued Sheran for breach of contract.
Sheran’s best defense to Ragofsky’s suit would be that Sheran’s:
15. Contracts made under which of the following conditions are voidable?
I. Duress
II. Undue influence
16. In contract law, which of the following correctly relates to the terms valid, void, and voidable?
17. Which of the following is correct regarding the parol evidence rule?
I. It allows for the admission of evidence of oral agreements that existed prior to the written contract if the oral agreements contradict the written contract.
II. It does not apply if the contract did not have to be in writing.
18. Which of the following is correct regarding assignment of rights in a contract?
I. Assignment must be in writing and signed by the assignor.
II. Most contract rights are NOT assignable as a matter of law.
19. An offer is made on July 2 that calls for acceptance to be in writing and received by August 10. Which of the following is correct regarding the acceptance of this offer?
I. An acceptance that is mailed August 3 and is received on August 6 is valid on August 3.
II. An acceptance that is mailed July 8 and received on August 12 is considered a counteroffer and not an acceptance.
20. Darrel is a minor who attends college and lives 900 miles from his parents. Darrel entered into the following contracts and has already received some of the benefits of both contracts. Darrel must pay for what has already been received but can cancel the remainder of which of the following contracts?
I. Guitar lessons
II. Campus housing
21. Which is correct as it relates to licensing statutes?
I. A revenue license is not required in order to collect for real estate services rendered in most states.
II. A regulatory license is required in order to collect for legal services rendered in most states.
22. Rick promises to pay anyone in his office $150 if they pick his son Ricky up at school on April 8 and drive him home. Allison, a coworker, promises to be parked at the school waiting for little Ricky. Brad, another coworker, tells Rick that he may be available and will know more the day before. Which of the following is correct?
23. If one party to a contract makes a material unilateral mistake:
I. the contract could still exist unless the other party knows it’s a mistake and is just trying to take advantage
II. the contract is voidable by the party who made the mistake

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