2008 AICPA newly released questions – regulation

Following are multiple choice questions recently released by the AICPA These questions were released by the AICPA with letter answers only Our editorial board has provided the accompanying explanations Please note that the AICPA generally releases questions that it does NOT intend to use again These questions and content may or may not be representative of questions you may see on any upcoming exams 2008 AICPA Newly Released Questions – Regulation Which of the following areas of professional responsibility should be observed by a CPA not in public practice? a b c d Objectivity Yes Yes No No Independence Yes No Yes No Solution: Choice "b" is correct A CPA must always be objective However, a CPA need not be independent except when engaged in pubic practice Choice "a" is the only choice that correctly reflects both points © 2008 DeVry/Becker Educational Development Corp All rights reserved 2008 AICPA Newly Released Questions – Regulation What is the standard that must be established to prove a violation of the anti-fraud provisions of Rule 10b5 of the Securities Exchange Act of 1934? a b c d Negligence Intentional misconduct Criminal intent Strict liability Solution: Choice "b" is correct A violation of Rule 10b-5 will be found only if the person acted with scienter intent or in reckless disregard of truth Choice "a" is incorrect Negligence is too low a standard for liability under rule 10b-5 liability requires at least gross negligence (reckless disregard for truth) Choice "c" is incorrect Criminal intent need not be established to impose liability under Rule 10b-5 -intentional misconduct or reckless disregard for truth is sufficient Choice "d" is incorrect Strict liability is liability without proof of any fault Rule 10b-5 requires proof of at least gross negligence or intentional misconduct (scienter) © 2008 DeVry/Becker Educational Development Corp All rights reserved 2008 AICPA Newly Released Questions – Regulation In June, Mullin, a general contractor, contracted with a town to renovate the town square The town council wanted the project done quickly and the parties placed a clause in the contract that for each day the project extended beyond 90 working days, Mullin would forfeit $100 of the contract price In August, Mullin took a three-week vacation The project was completed in October, 120 working days after it was begun What type of damages may the town recover from Mullin? a b c d Punitive damages because taking a vacation in the middle of the project was irresponsible Compensatory damages because of the delay in completing the project Liquidated damages because of the clause in the contract No damages because Mullin completed performance Solution: Choice "b" is correct Whenever a contract is breached, the nonbreaching party is entitled to compensatory damages (damages to pay for the injuries caused by the breach) Here, the contract was breached performance was to be completed within 90 days and instead Mullin took 120 days to perform Thus, the town would be entitled to compensatory damages equal to any loss caused by the delay in completion Choice "a" is incorrect Punitive damages generally are not available in actions for breach of contract -and this is true even if the breach was intentional Punitive damages generally are limited to actions regarding intentional torts Choice "c" is incorrect A liquidated damages clause is enforceable only if it does not constitute a penalty, actual damages would be difficult to assess, and the liquidated amount is a reasonable estimate of the actual damages that will arise in the case of breach Here, when the parties entered into the contract, it was probably difficult to assess how much damage would be caused to the town if its town square renovations were delayed However, nothing in the facts indicates that the $100 per day was a reasonable estimate of actual damages or that it was anything more than a penalty to encourage Mullin to perform quickly Absent such information, we cannot presume that the liquidated damages clause is enforceable Choice "d" is incorrect Although Mullin completed the performance called for in the contract, there nevertheless was a breach here The contract required performance to be complete within 90 days, and performance was not completed until 120 days after work began Whenever a party breaches a contract, the party is liable for any damages caused by the breach Although we are not told how the town was damaged by the delay, at a minimum it would be entitled to nominal damages (e.g., $1) arising from the breach © 2008 DeVry/Becker Educational Development Corp All rights reserved 2008 AICPA Newly Released Questions – Regulation Baker is a partner in BDT with a partnership basis of $60,000 BDT made a liquidating distribution of land with an adjusted basis of $75,000 and a fair market value of $40,000 to Baker What amount of gain or loss should Baker report? a b c d $35,000 loss $20,000 loss $0 $15,000 gain Solution: Choice "c" is correct In a complete liquidation of a partnership, a partner (Baker) recognizes gain only to the extent that the money received (if any) exceeds that partner's adjusted basis in the partnership immediately before the distribution In this question, there is no money distributed, so there is no gain The partner recognizes loss if only money, unrealized receivables, or inventory are received and if the basis of the assets received is less than the partner's basis in the partnership In this question, there is no money, unrealized receivables, or inventory distributed, so there is no loss, regardless of the partner's basis in the partnership Even though the land has a $40,000 fair market value, Baker's basis in the land is his $60,000 partnership basis, effectively giving him a $20,000 built-in loss that he can recognize by selling the land Choice "a" is incorrect The $35,000 is the difference between the $40,000 fair market value of the land and the land's $75,000 adjusted basis (to the partnership) That difference is not reported as a loss by the partner or by the partnership Choice "b" is incorrect The $20,000 is the difference between the $40,000 fair market value of the land and the $60,000 partner's adjusted basis in the partnership That amount is the partner's built-in loss in the land, but the loss is not recognized unless and until the partner sells or disposes of the land in a separate taxable transaction Choice "d" is incorrect The $15,000 is the difference between the $60,000 partner's adjusted basis in the partnership and the $75,000 partnership's adjusted basis in the land That difference is not recognized in any way © 2008 DeVry/Becker Educational Development Corp All rights reserved 2008 AICPA Newly Released Questions – Regulation Under the ethical standards of the profession, which of the following investments by a CPA in a corporate client is an indirect financial interest? a b c d An investment held in a retirement plan An investment held in a blind trust An investment held through a regulated mutual fund An investment held through participation in an investment club Solution: Choice "c" is correct A CPA in public practice must be independent in fact and appearance Independence will be impaired if the CPA has a direct financial interest with an attestation client or a material indirect financial interest in a client An indirect financial interest involves a removed relationship, such as owning shares in a mutual fund that owns stock in a corporate client Choices "a", "b" and "c" are incorrect A direct financial interest is an interest held directly in a client An interest in a client's retirement plan or in a blind trust holding stock in a client would be considered a direct interest © 2008 DeVry/Becker Educational Development Corp All rights reserved 2008 AICPA Newly Released Questions – Regulation Nolan designed Timber Partnership's new building Nolan received an interest in the partnership for the services Nolan's normal billing for these services would be $80,000 and the fair market value of the partnership interest Nolan received is $120,000 What amount of income should Nolan report? a b c d $0 $40,000 $80,000 $120,000 Solution: Choice "d" is correct In this question, Nolan receives an interest in the partnership for services performed The services are valued at the fair market value of what is received (the partnership interest) of $120,000, regardless of what Nolan's normal billing for these services might have been Choice "a" is incorrect Nolan would certainly report some income from the services that she performed when something is received in return for those services Choice "b" is incorrect The $40,000 is the difference between the fair market value of the partnership (and of the services performed) and Nolan's billing That number is meaningless in this question Choice "c" is incorrect The $80,000 is Nolan's normal billing for her services However, her income is the $120,000 fair market value of the services Perhaps, she should charge more The difference is not considered a gift © 2008 DeVry/Becker Educational Development Corp All rights reserved 2008 AICPA Newly Released Questions – Regulation The CSU partnership distributed to each partner cash of $4,000, inventory with a basis of $4,000 and a fair market value (FMV) of $6,000, and land with an adjusted basis of $5,000 and an FMV of $3,000 in a liquidating distribution Partner Chang had an outside basis in Chang's partnership interest of $12,000 In the second year after receiving the liquidating distribution, Chang sold the inventory for $5,000 and the land for $3,000 What income must Chang report upon the sale of these assets? a b c d $0 gain or loss $0 ordinary gain and $1,000 capital loss $1,000 ordinary gain and $1,000 capital loss $1,000 ordinary gain and $0 capital loss Solution: Choice "c" is correct In this liquidating distribution of a partnership, three different assets are distributed The $4,000 cash distributed reduces Chang's (outside) basis in the partnership to $8,000 At that point, Chang's outside basis is less than the total (inside) basis of the remaining property distributed The inventory gets $4,000 of basis first and Chang's outside basis is reduced to $4,000 The land gets the remaining $4,000 basis (whatever is left over) The sale of the inventory for $5,000 then produces a $1,000 ordinary gain ($5,000 - $4,000), and the sale of the land for $3,000 produces a $1,000 capital loss ($3,000 - $4,000) Choice "a" is incorrect There is gain or loss on the sale transactions because each of the assets distributed is sold for an amount that is different from its basis This choice would require that the inventory be given a basis of $5,000 and the land be given a basis of $3,000 Choice "b" is incorrect A $0 ordinary gain could be recognized if the inventory were given a basis of $5,000, but there is no reason for doing that The $1,000 capital loss is correct, but the choice is already incorrect Choice "d" is incorrect A $0 capital loss could be recognized if the land were given a basis of $3,000 That would require that the land be given a basis of its fair market value on the distribution date However, it is the bases of the property distributed that are allocated, not the fair market values The $1,000 ordinary gain is correct, but the choice is already incorrect © 2008 DeVry/Becker Educational Development Corp All rights reserved 2008 AICPA Newly Released Questions – Regulation A couple filed a joint return in prior tax years During the current tax year, one spouse died The couple has no dependent children What is the filing status available to the surviving spouse for the first subsequent tax year? a b c d Surviving spouse Married filing separately Single Head of household Solution: Choice "c" is correct For the first subsequent tax year (and all other subsequent tax years) after the death of a spouse with no dependent children, filing status is single Choice "a" is incorrect Filing status is not "surviving spouse" because there are no dependent children Choice "b" is incorrect Filing status is not "married filing separately" in the first subsequent tax year after the death of a spouse since the couple is no longer married Choice "d" is incorrect Filing status is not "head of household" because there are no dependent children and no other qualifying dependents © 2008 DeVry/Becker Educational Development Corp All rights reserved 2008 AICPA Newly Released Questions – Regulation Under the Negotiable Instruments Article of the UCC, which of the following defenses generally may be used against all holders of negotiable instruments? a b c d Breach of warranty Fraud in the inducement Minority of the maker Lack of consideration Solution: Choice "c" is correct Under the Negotiable Instruments Article, a maker or drawer may raise any contract defense he has against a regular holder, but the defenses that can be raised against a holder in due course (a holder who takes an instrument for value, in good faith, and without notice of any defenses on or claims to the instrument) are limited to those commonly known as "real" defenses One such real defense is the minority of the maker (we use the term "infancy" in class, but they mean the same thing) Choices "a", "b" and "d" are incorrect because they are not so-called real defenses and, as such, cannot be raised against a holder in due course © 2008 DeVry/Becker Educational Development Corp All rights reserved AICPA Newly Released Questions – Regulation 26 Pope, a C corporation, owns 15% of Arden Corporation Arden paid a $3,000 cash dividend to Pope What is the amount of Pope's dividend-received deduction? a b c d $3,000 $2,400 $2,100 $0 Solution: Choice "c" is correct With a 15% ownership, the percentage for the dividends-received deduction is 70%, or $2,100 (70% x $3,000) Choice "a" is incorrect With a 15% ownership, the percentage for the dividends-received deduction is 70%, not 100% ($3,000) Choice "b" is incorrect With a 15% ownership, the percentage for the dividends-received deduction is 70%, not 80% (80% x $3,000 = $2,400) Choice "d" is incorrect There will be a dividends-received deduction with a 15% ownership 26 AICPA Newly Released Questions – Regulation 27 Under the Negotiable Instruments Article of the UCC, a holder in due course in a nonconsumer transaction takes a negotiable instrument free from which of the following defenses that may be asserted by a party with whom the holder in due course had not dealt? a b c d Fraud in the execution Discharge in an insolvency proceeding Breach of contract Infancy, to the extent that it is a simple contract defense Solution: Choice "c" is correct A holder in due course (a holder who takes an instrument for value, in good faith, and without notice of any defenses on or claims to the instrument) takes an instrument free from ordinary contract defenses and is subject to only certain defenses commonly known as known as "real" defenses Breach of contract is an ordinary contract defense that a holder in due course is not subject to Choice "a" is incorrect Fraud in the execution (as opposed to fraud in the inducement) is a so-called real defense that may be raised against a holder in due course Choice "b" is incorrect Discharge in insolvency is a so-called real defense that may be raised against a holder in due course Choice "d" is incorrect Infancy, to the extent it is a simple contract defense, is a so-called real defense that may be raised against a holder in due course 27 AICPA Newly Released Questions – Regulation 28 Dunn received 100 shares of stock as a gift from Dunn's grandparent The stock cost Dunn's grandparent $32,000 and it was worth $27,000 at the time of the transfer to Dunn Dunn sold the stock for $29,000 What amount of gain or loss should Dunn report from the sale of the stock? a b c d $0 $2,000 gain $3,000 gain $3,000 loss Solution: Choice "a" is correct To determine the amount of gain or loss that should be reported on the sale of gifted property, a determination must be made as to whether the property is sold at a gain or a loss The stock in this question has a $27,000 value which is less than its $32,000 cost The basis for gain is the adjusted basis of the donor on the date of gift, or $32,000 However, the stock is sold for $29,000, which is not at a gain The basis for loss is the lower of the adjusted basis or the fair market value on the date of gift, or $27,000 However, the stock is not sold at a loss In this situation, neither gain nor loss is recognized, and the "middle" basis of the subsequent sales price is used Choice "b" is incorrect The stock is not sold at a gain The basis would have had to be $27,000 for the stock to be sold at a $2,000 gain ($29,000 - $27,000) That is the fair market value on the date of gift, but it is not the basis used when the property gifted is sold at a gain Choice "c" is incorrect The stock is not sold at a gain The basis would have had to be $26,000 for the stock to be sold at a $3,000 gain ($29,000 - $26,000) It is difficult to determine how that basis could have been calculated Choice "d" is incorrect The stock is not sold at a loss The basis would have had to be $32,000 for the stock to be sold at a $3,000 loss ($29,000 - $32,000) That is the adjusted basis of the stock, but it is not the basis used when the property gifted is sold at a loss 28 AICPA Newly Released Questions – Regulation 29 Adapted Train issued a $10,000 note to Curator in exchange for a painting that Curator claimed to have been painted by a certain artist The note provided that it was payable 10 days after Train sold his car Train sold his car on May Meanwhile, Curator transferred the note to Contractor in payment of work Contractor had performed for Curator When Contractor presented the note to Train for payment 10 days after Train sold his car, Train refused to pay Contractor, claiming that the note was not negotiable and that Curator had defrauded him because the painting was not by the painter specified and, instead, was an almost valueless copy Under the Negotiable Instruments Article of the UCC, which of the following statements is correct regarding the status of the note? a b c d The note was not a negotiable instrument because it was not payable at a definite time The note was not negotiable because it was subject to another writing The note was negotiable because it was for a fixed amount of money The note was negotiable because it was conditioned on an event that took place Solution: Choice "a" is correct To be negotiable, an instrument must be payable at a definite time "10 days after Train sells his car" is not a definite time we not know when or if the car will be sold Therefore, the instrument is not negotiable Choice "b" is incorrect To be negotiable, an instrument generally cannot state that it is subject to another writing However, nothing in the facts indicates that Train's note said that it was subject to another writing Choice "c" is incorrect To be negotiable, an instrument must be for a fixed amount of money, but that an instrument is for a "sum certain" alone is not sufficient to make the instrument negotiable The other requirements for negotiability must be met as well, and here, the note is not negotiable because it was not payable at a definite time Choice "d" is incorrect Whether a note is negotiable is determined from the face of the instrument (i.e., whether it is conditional depends on what the instrument says) A condition in the instrument is not cured merely because the condition has been fulfilled 29 AICPA Newly Released Questions – Regulation 30 U Co had cash purchases and payments on account during the current year totaling $455,000 U's beginning and ending accounts payable balances for the year were $64,000 and $50,000, respectively What amount represents U's accrual basis purchases for the year? a b c d $441,000 $469,000 $505,000 $519,000 Solution: Choice "a" is correct This question is a simple financial accounting Account Analysis Format (BASE mnemonic, or AAF) question for the accounts payable account The purchases are a plug and can be determined as follows: Beginning balance Add: Purchases Subtract: Cash payments Ending balance $ 64,000 $441,000 ($455,000) $ 50,000 (given) (plug) (given) (given) Choice "b" is incorrect This choice is incorrect per the analysis above The $469,000 appears to be the $455,000 cash payments plus the $64,000 beginning of year balance less the $50,000 end of year balance If the AAF format is rearranged (not the suggested way of working with an AAF), that is backwards Choice "c" is incorrect This choice is incorrect per the analysis above The $505,000 appears to be the $455,000 cash payments plus the $50,000 end of year balance Choice "d" is incorrect This choice is incorrect given the analysis above The $519,000 appears to be the $455,000 cash payments plus the $64,000 beginning of year balance 30 AICPA Newly Released Questions – Regulation 31 Under the Code of Professional Conduct of the AICPA, which of the following is required to be independent in fact and appearance when discharging professional responsibilities? a b c d A CPA in public practice providing tax and management advisory services A CPA in public practice providing auditing and other attestation services A CPA not in public practice All CPAs Solution: Choice "b" is correct A CPA in public practice should be independent in fact and appearance when providing auditing and other attestation services Choice "a" is incorrect Only a CPA providing audit or attestation services need be independent; A CPA performing tax and management advisory services need not be independent Choice "c" is incorrect Only a CPA in public practice must be independent; a CPA nor in public practice need not be independent Choice "d" is incorrect Only CPAs who are in public practice must be independent; not all CPAs 31 AICPA Newly Released Questions – Regulation 32 Which of the following is a miscellaneous itemized deduction subject to the 2% of adjusted gross income floor? a b c d Gambling losses up to the amount of gambling winnings Medical expenses Real estate tax Employee business expenses Solution: Choice "d" is correct Employee business expenses are a miscellaneous itemized deduction subject to the 2% of adjusted gross income (AGI) floor Choice "a" is incorrect Gambling losses up to the amount of gambling winnings are NOT a miscellaneous itemized deduction subject to the 2% of adjusted gross income floor Those losses may offset gambling winnings up to the amount of the winnings (without a further reduction of the item) Any additional gambling losses are not deductible at all and not carry forward) Choice "b" is incorrect Medical expenses are an itemized deduction NOT subject to the 2% of adjusted gross income floor (they are subject to a 7.5% floor) Choice "c" is incorrect Real estate taxes are an itemized deduction NOT subject to the 2% of adjusted gross income floor 32 AICPA Newly Released Questions – Regulation 33 Which of the following transactions is subject to registration requirements of the Securities Act of 1933? a b c d The public sale by a corporation of its negotiable 10-year notes The public sale by a charitable organization of 10-year bearer bonds The sale across state lines of municipal bonds issued by a city Issuance of stock by a publicly-traded corporation to its shareholders because of a stock split Solution: Choice "a" is correct The Securities Act of 1933 requires registration of issuances of securities unless an exemption applies Long-term notes (with maturity dates beyond nine months) are considered securities, and there is no exemption for 10-year notes of corporations Thus, the sale must be registered Choice "b" is incorrect Securities of charitable organizations enjoy a securities exemption and need not be registered under the 193 Act Choice "c" is incorrect Securities issued by municipalities enjoy a securities exemption even if they are sold across state lines Thus, registration is not required under the 1933 Act Choice "d" is incorrect A transaction exemption applies when a corporation issues stock to its own shareholders and no commission is paid, as in the case of a stock split 33 AICPA Newly Released Questions – Regulation 34 Which of the following items is a capital asset? a b c d An automobile for personal use Depreciable business property Accounts receivable for inventory sold Real property used in a trade or business Solution: Choice "a" is correct An automobile for personal use is a capital asset Choice "b" is incorrect Depreciable business property is a Section 1231 asset, not a capital asset Choice "c" is incorrect Accounts receivable for inventory sold is an ordinary income asset, just like the original inventory Choice "d" is incorrect Real property used in a trade or business is a Section 1231 asset, not a capital asset 34 AICPA Newly Released Questions – Regulation 35 A C corporation has gross receipts of $150,000, $35,000 of other income, and deductible expenses of $95,000 In addition, the corporation incurred a net long-term capital loss of $25,000 in the current year What is the corporation's taxable income? a b c d $65,000 $87,000 $90,000 $115,000 Solution: Choice "c" is correct The C corporation's income before net long-term capital loss is $90,000 ($150,000 + $35,000 - $95,000) For a corporation, a net long-term capital loss is not deductible in the current year (3-year carryback and 5-year carryforward allowed), so the taxable income is the same amount Choice "a" is incorrect The $65,000 is the $90,000 less the $25,000 net long-term capital loss The net long-term capital loss is not deductible in the current year, but it may be carried back years and forward years Choice "b" is incorrect The $87,000 is the $90,000 reduced by a $3,000 long-term capital loss Unfortunately, the $3,000 deduction is available only for individuals, not for C corporations Choice "d" is incorrect The $115,000 is the $90,000 plus the $25,000 net long-term capital loss The net long-term capital loss should not be deducted or added 35 AICPA Newly Released Questions – Regulation 36 Which of the following professional bodies has the authority to revoke a CPA's license to practice public accounting? a b c d National Association of State Boards of Accountancy State board of accountancy State CPA Society Ethics Committee Professional Ethics Division of AICPA Solution: Choice "b" is correct The state board of accountancy is the only body listed that can grant a CPA license and the only body that may revoke such a license Choices "a", "c" and "d" are incorrect, per the above 36 AICPA Newly Released Questions – Regulation 37 Jagdon Corp.'s book income was $150,000 for the current year, including interest income from municipal bonds of $5,000 and excess capital losses over capital gains of $10,000 Federal income tax expense of $50,000 was also included in Jagdon's books What amount represents Jagdon's taxable income for the current year? a b c d $185,000 $195,000 $205,000 $215,000 Solution: Choice "c" is correct Taxable income is accounting (book) income adjusted for other items In this question, the book income is $150,000 That book income includes $50,000 federal income tax expense, and that amount should be added back for taxable income The $5,000 interest income from municipal bonds should be subtracted because it is not taxable, and the $10,000 excess capital losses over capital gains should be added back because the excess is not a deduction in the current year The net result is $205,000 Choice "a" is incorrect The $185,000 is the $205,000 with the $10,000 excess capital losses subtracted and not added Choice "b" is incorrect The $195,000 is the $205,000 with the $10,000 ignored Choice "d" is incorrect The $215,000 is the $205,000 with the $5,000 interest income from municipal bonds added and not subtracted 37 AICPA Newly Released Questions – Regulation 38 Which of the following acts by a CPA is a violation of professional standards regarding the confidentiality of client information? a b c d Releasing financial information to a local bank with the approval of the client's mail clerk Allowing a review of professional practice without client authorization Responding to an enforceable subpoena Faxing a tax return to a loan officer at the request of the client Solution: Choice "a" is correct A CPA owes clients a duty of confidentiality which generally prohibits the CPA from revealing a client's confidential information without the client's consent A client's mail clerk would not have sufficient authority to validly authorize disclosure Choice "b" is incorrect A CPA may disclose confidential client information to a professional practice review board without the client's permission Choice "c" is incorrect A CPA may disclose confidential client information in response to an enforceable subpoena, even if he client objects to disclosure Choice "" is incorrect A CPA may, of course, disclose confidential client information when the client requests disclosure 38 AICPA Newly Released Questions – Regulation 39 A self-employed taxpayer had gross income of $57,000 The taxpayer paid self-employment tax of $8,000, health insurance of $6,000, and $5,000 of alimony The taxpayer also contributed $2,000 to a traditional IRA What is the taxpayer's adjusted gross income? a b c d $55,000 $50,000 $46,000 $40,000 Solution: Choice "d" is correct Adjusted gross income is gross income plus or minus certain other amounts Half of the $8,000 self-employment tax is an adjustment for AGI, as is the $6,000 self-employed health insurance, the $5,000 alimony, and the $2,000 contribution to a traditional IRA All of these amounts (total of $17,000) are subtracted from the $57,000 gross income to arrive at AGI The AGI is thus $40,000 Choice "a" is incorrect The $55,000 is the $57,000 gross income subtracting only the $2,000 IRA contribution Choice "b" is incorrect The $50,000 is the $57,000 subtracting only the $5,000 alimony and the $2,000 IRA contribution Choice "c" is incorrect The $46,000 is the $57,000 subtracting everything but the $6,000 self-employed health insurance 39 AICPA Newly Released Questions – Regulation 40 Which of the following is a prerequisite for the creation of an agency relationship? a b c d Consideration must be given The agent must have capacity The principal must have capacity The consideration must be in writing Solution: Choice "c" is correct Agency is a consensual relationship Creation of an agency relationship requires the consent of the parties and that the principal be competent Choice "a" and "d" are incorrect Consideration is not required to create an agency relationship Choice "b" is incorrect The agent need not have capacity; only the principal need have capacity 40 ... choice that correctly reflects both points © 2008 DeVry/Becker Educational Development Corp All rights reserved 2008 AICPA Newly Released Questions – Regulation What is the standard that must be... negligence or intentional misconduct (scienter) © 2008 DeVry/Becker Educational Development Corp All rights reserved 2008 AICPA Newly Released Questions – Regulation In June, Mullin, a general contractor,... damages (e.g., $1) arising from the breach © 2008 DeVry/Becker Educational Development Corp All rights reserved 2008 AICPA Newly Released Questions – Regulation Baker is a partner in BDT with a