Week 6 agency and employment

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Agency and Employment



1.         The principal hires an agent to manage her boutique.  After several months, the principal fires this agent.  To avoid liability for any further acts done by this agent, the principal must give:

a.         Direct notice to all persons who knew of the agency.

b.         Direct notice to those who dealt with the agent, and no notice to anyone else.

c.         Direct notice to those who dealt with the agent, but only constructive notice to those who knew of the agency but did not deal with the agent.

d.         Constructive notice to all persons who knew of the agency, and no notice to anyone else.

e.         No notice of the termination is required in order to avoid liability.



2.         Which of the following would not terminate an agency by operation of law?

a.         A real estate agent loses his license.

b.         A principal hires another agent with similar duties.

c.         The principal is declared bankrupt.

d.         A lightning bolt kills the principal.



3.         You have contracted orally with Patty to buy some real estate on her behalf.  The only limitations are that she wants a vacant lot in a residential area for less than $100,000.  If you find such a residential lot costing $85,000, what type of authority do you have to enter into this transaction on Patty’s behalf?

a.         Express.

b.         Apparent.

c.         Implied.

d.         Ratification



4.         Susan Marie works as a receptionist for a computer software company.  Susan Marie works from 8 a.m. to 5 p.m. on Monday through Thursday, and from 8 a.m. to noon on Friday.  Susan Marie is paid $15 per hour, and is told how to do her job and what she should be working on at any particular time.  The software company and Susan Marie have executed an “independent contractor agreement” in which the terms of this arrangement are specified.  Which of the following is true?

            a.         Susan Marie would be treated as an employee because she is paid for the work that she does.

            b.         Susan Marie would be treated as an employee because of the control exercised by the software company over her work and because of the manner in which she is paid.

            c.         Susan Marie would be treated as an independent contractor because of the terms of the express agreement with the software firm.

            d.         Susan Marie would be treated as an independent contractor because of the irregular working hours of working only part of the day on Fridays.


5.         Apparent authority can be best described as a situation where:

            a.         The principal and agent undertake actions in accordance with their earlier agreement that one act as agent for the other.

            b.         The principal has made representations to a third party that someone is to act as her agent.

            c.         The agent has made representations to a third party that he is acting as an agent for another.

            d.         The conduct of two parties indicates that they are acting in a principal and agent capacity.

            e.         Both B and C.



6.         If the law changes such that the actions called for in an agency arrangement become illegal after the agency has been carried on legally for some period of time, what is the consequence?

            a.         The agency is terminated retroactively and the parties are left where they are.

            b.         The agency is terminated retroactively and the parties must each return any consideration received from the other.

            c.         The agency is terminated effective upon the change in law taking effect.

            d.         The agency is not terminated, but the principal and agent will each become liable for his or her own illegal actions.

            e.         The agency is not terminated, but the principal and agent will each become liable for the illegal actions of the other.



Liability of Principals and Agents



7.         Which of the following is not a duty of the agent in a principal-agency relationship.

            a.         Loyalty.

            b.         Obedience.

            c.         Accountability.

            d.         Performance.

            e.         Indemnification.



8.         The duty of a principal to indemnify her agent can best be described as a duty to:

            a.         Pay to the agent any loss the agent suffers because of the principal.

            b.         Promptly pay the agreed compensation in the agency arrangement.

            c.         Give the agent adequate instructions to properly carry out the duties of the agency.

            d.         Prevent the agent from having personal responsibility for torts that the agent commits while acting within the scope of the agency.



9.         In an agency relationship involving a principal, an agent, and a third party, whether or not the agency relationship has been disclosed to the third party is a crucial issue.  This would affect:

a.         The contract liability of the principal to the third party for a tort of the agent.

b.         The tort liability of the principal to the third party for a tort of the agent.

c.         The tort liability of the agent to the third party for the agent’s tort.

d.         The contract liability of the agent to the third party on a contract made by the agent on the principal’s behalf.

e.         The liability of the principal to compensate the agent for the agent’s services.



10.       Under which circumstance will a principal notbe responsible for the tort of the agent?

a.         If the agent was violating the instructions of the principal in committing the tort.

b.         If the agency agreement between the agent and principal says that the principal will not be responsible for the agent’s torts.

c.         If the tort was committed outside the scope of the agency arrangement.

d.         If the tort is an unintentional tort.



11.       Edward is an employee of Huge Corporation who works in one of the company’s stores.  One day Edward sees one of his ex-girlfriends, who jilted him, in the store.  He is still mad at her for this, so he goes over and slugs her in the face.  She sues Edward and Huge Corporation.  If the state applies the motivation test, which of the following is true?

a.         Huge and Edward could each be liable for the tort.

b.         Huge, but not Edward, would be liable for the tort.

c.         Edward, but not Huge, would be liable for the tort.

d.         Neither Edward nor Huge would be liable for the tort.

e.         Huge and Edward could each be liable for the tort, but the plaintiff must first seek recovery from Edward.



12.       Pedro hires Andrea to negotiate the purchase of a sailboat for Pedro.  Andrea decides to buy from Sally a sailboat meeting Pedro’s specifications.  Andrea tells Sally that the purchase is really being made by Pedro, and Andrea and Sally sign a written contract, with Andrea signing on Pedro’s behalf.  Based on all this:

a.         Pedro is not liable on this contract, but Andrea is liable.

b.         Neither Andrea nor Pedro can be held liable on this contract.

c.         Andrea is not liable on this contract. but Pedro is liable.
d.         Either Andrea or Pedro could be held liable on this contract



Employment and Worker Protection Laws



13.       Under what doctrine are both the employer and employee free to terminate an employment relationship at any time?

            a.         The mutual employment doctrine.

            b.         The free dissociation doctrine.

            c.         The independent contracting employment doctrine.

            d.         The employment at-will doctrine.

            e.         The employment freedom of termination doctrine.



14.       Which of the following statements is true about workers’ compensation?

a.         The employer can avoid liability if the injured employee was contributorily negligent in causing the injury.

b.         When an employee is injured, the employee must decide whether to seek a workers’ compensation payment or file an ordinary lawsuit against the employer.

c.         The employer is strictly liable for employment-related injuries, and the employee will file his claim through an administrative procedure rather than by filing an ordinary lawsuit.

d.         If the employee is dissatisfied with the amount received under the workers’ compensation system for her injuries, she generally then can file an ordinary lawsuit.

e.         Employees (or their unions) generally negotiate with employers over whether to be included in the workers’ compensation system.



15.       Under the Occupational Safety and Health Act:

a.         Purchasers of a company’s products are assured that they are safe for use in the home.

b.         A company can be found to be in violation even if a specific safety regulation is not violated.

c.         Complaints are handled by the Equal Employment Opportunity Commission.

d.         Very few safety standards have actually been adopted.



16.       Which of the following is not addressed by ERISA?

a.         Funding requirements of pension plans.

b.         Companies that must provide pension plans for employees.

c.         Investment limitations of a pension fund in the stock of the sponsoring corporation.

d.         Vesting requirements.

e.         Disclosure and reporting requirements.



17.       Megan is under 18 years of age and she wants to get a job.  However, she has heard that her employment is limited because she is under age.  Which of the following statements is true?

a.         If Megan is under 14, she cannot get any job.

b.         If Megan is under 18, she can get any job she wants, so long as her parents consent.

c.         If Megan is 14 or 15, she can work unlimited hours in nonhazardous jobs.

d.         If Megan is 16 or 17, she can work unlimited hours in nonhazardous jobs.



18.       Justin was hired in February of 2004 as a salesperson.  There is no written employment contract, and Justin is paid on a commission basis.  Justin’s manager has said to Justin on several occasions that if Justin continues to meet his sales quotas, the company “will keep him around for a long time.”  Justin has always met his sales quotas, but is told one day that the company has decided to replace him because he does not project the image that the company wants.  If Justin is an at-will employee, which of the following is true?

            a.         As an at-will employee, there are no restrictions on the employer terminating Justin.

            b.         Because there is no written employment contract, the employer can terminate Justin.

            c.         The employer can terminate Justin only if the employer would suffer a loss by not terminating him.

            d.         The statements by the manager could likely give Justin contract rights that could amount to an exception to the at-will doctrine.

            e.         The employer would not be able to fire Justin on the basis of public policy.



Equal Opportunity Employment



19.       Under the Civil Rights Act of 1964, an employer cannot discriminate against a member of a protected class in:

            a.         Hiring.

            b.         Termination of employment.

            c.         Promotion.

            d.         Conditions of Employment.

            e.         All of these are correct.



20.       Which of the following would be a legal defense to a charge of discrimination under Title VII?

a.         Discrimination based on merit.

b.         Discrimination based on seniority.

c.         Discrimination based on a bona fide occupational qualification.

d.         A, B, and C.

e.         B and C only.



21.       The Age Discrimination in Employment Act makes it illegal for:

            a.         Employers to hire only employees who are age 40 and over.

            b.         Employers to have a seniority system.

            c.         Employers to know the age of job applicants before making a hiring decision.

            d.         Employers to have a mandatory retirement age for most jobs.

            e.         Employers to have a workforce comprised primarily of very young or very old workers.



22.       A job applicant in the city of Portland is not hired by a corporation because he is gay and because he is from California.  He could:

a.         Recover under Title VII of the Civil Rights Act.

b.         Recover under the Fair Labor Standards Act.

c.         Recover because this is an improper burden on interstate commerce.

d.         Keep looking for a job because he has no remedy under federal statutes.



23.       Aaron has started his own business that has grown rapidly to the point that he now has 11 employees.  Which of the following is not true?

a.         Title I of the Americans with Disabilities Act is administered by the Equal Employment Opportunity Commission.

b.         The Americans with Disabilities Act covers providers of public accommodations as well as employers.

c.         Aaron is not subject to the requirement to provide reasonable accommodations to his employees.

d.         The difficulty of providing accommodation to an employee is not considered in deciding whether or not the accommodation must be provided.



24.       Martha and John work in a factory.  The factory pays each worker $5 per hour plus $.25 per piece of work completed.  John is always paid more money than Martha, because John can work faster than Martha can.  This situation is:

a.         Illegal, because of pay discrimination.

b.         Legal, because of a seniority system.

c.         Legal, because of a defined merit system.

d.         Legal, because the pay is based on a difference in quantity or quality of work.

e.         Legal, because the pay is based on “some other factor than sex.”



Liability of Accountants



25.       If an auditor is unable to gather enough information to express an opinion about the financial statements, the auditor would issue a(n):

            a.         Unqualified opinion.

            b.         Qualified opinion.

            c.         Disclaimer of opinion.

            d.         Adverse opinion.



26.       Which of the following is not typically a common law basis of liability to the client of an accountant?

            a.         Fraud.

            b.         Breach of contract.

            c.         Negligence.

            d.         Strict liability.



27.       The state law rule of liability of accountants for negligence to third parties that is most favorable to the accountant is:

            a.         The Ultramaresdoctrine.

            b.         The Restatement (Second) of Torts standard.

            c.         The strict liability standard.

            d.         The foreseeability standard.



28.       The Private Securities Litigation Reform Act of 1995 made what change affecting the liability of professionals in connection with securities?

a.         Changed the duty of care for accountants from a local standard to a uniform national standard.

b.         Made class action lawsuits by plaintiffs easier to file.

c.         Replaced the rule for liability of defendants from joint and several liability to proportionate liability.

d.         Made accountants liable for misstatements resulting from constructive fraud.



29.   Elizabeth is an accountant in a small town in a rural western state.  Elizabeth has performed an audit for a large agricultural cooperative in her town.  The accountant who previously performed the audit died in the past year, and her working papers could not be found, so Elizabeth had a difficult time with the audit.  There were some problems with the audit and the financial statements such that the local bank is not willing to renew the cooperative’s line of credit.  If the cooperative sues Elizabeth, what is most likely true about the duty of care imposed on Elizabeth?

            a.         Elizabeth will be held to a duty of care based on an accountant practicing in a small rural town.

            b.         Elizabeth will be held to a lower standard of care because of the lack of access to the prior year’s work papers.

            c.         Elizabeth will be held to the same general standard of care as accountants anywhere in the nation.

            d.         Elizabeth committed constructive fraud by proceeding with the audit without having the working papers from the prior year.



30.       Under the rules of Section 10A of the Securities Exchange Act of 1994, if an auditor detects an illegal act having a material effect on the financial accounts, to whom must the accountant first report the finding?

            a.         The client’s management and audit committee.

            b.         The client’s board of directors.

            c.         The Securities and Exchange Commission.

            d.         The client’s shareholders.


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