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Part 9 THe Legal environment
ANSWER KEY
Chapter 32 Professional Liability
Opening Case Questions
3. Communication is a key in this case because knowledge is a key. The element of “near-privity”
4. Again as above, knowledge is a key. The element of “near-privity” may be established if FSC
A Question of Ethics
Indeterminacy from Another Angle
1. Determining and explaining which of the three theories offered in this Self-Evident Rights
feature presents the most accurate view of the legal system is problematic and, therefore,
2. Of the three theorists, Ernest Weinrib promotes a view that is basically in line with the idea
that the judicial–economic system is a balancing act that aims at creating a flexible and
responsive system. In “Legal Formalism: On the Immanent Rationality of Law,” Weinrib
declares that the most accurate way to examine the law is to look at its “inner coherence.”
3. This question can be answered using any one of the theories outlined above. One could argue
(position #1) that, because the law is chaotic, the legislature (and the courts) must step in
periodically to re-establish order, even though permanent order is impossible. Or one could
5. Again it is possible to make an argument to prove that each of the three views is supported by
the evidence in this chapter, especially in relation to the need for laws like Sarbanes-Oxley and
Dodd-Frank. One position might be that the use of such laws demonstrates that the legal system
CLASSIC CASES
Unconstitutional or Unethical: State of Florida, et al. v. U.S. Department of Health
and Human Services—One More Time
If the Affordable Care Act had been declared unconstitutional, already established and currently
Questions for Review and Discussion
1. A certified public accountant is an accountant who has met certain age, experience, and testing
2. Generally accepted accounting principles are procedures that accountants must use in
3. An audit is an examination of the financial records of an organization to determine whether those
records represent an accurate and fair representation of the financial health of the organization. When
auditors are satisfied that the financial records accurately reflect the company’s financial status, they
will issue an unqualified opinion. When auditors issue a qualified opinion they are saying that the
books represent the company’s financial health as of a given date. However, the auditors may qualify
4. Privity is a relationship that emerges when two or more parties enter a contract. The parties to the
5. Architects owe a duty to exercise due care and skill in carrying out professional duties. The
standard does not demand that the architect design perfect or faultless structures. Architects can make
8. Under the locality rule, similar health care professionals are compared in relation to their level of
9. Ostensible authority has been used by plaintiffs to hold a hospital liable for the torts of its
independent contractor physicians. Ostensible authority is created when a hospital presents itself to the
Cases for Analysis
1. The judge protected Stewart’s e-mail to her daughter under the attorney-client privilege and the
work product privilege. The judge labeled Stewart’s daughter a “valued confidant and counselor” and
3. No. The SEC was incorrect. Arthur Young and Company was required to follow GAAS. Having
done so, it met its standard of care. In addition, while auditors are required to look for fraud and illegal
4. No. The accountants were incorrect. Third parties damaged by negligence or fraud of an
accountant can bring suit against that accountant. Whether the third party will succeed in that suit will
depend upon the facts and the law of the state. Protection from negligently prepared financial
5. No. The measure of damages in a suit against architects for failing to fulfill the terms of a contract
does not depend on a drop in the market value of the structure. The appropriate measure of damages,
6. Probably not. The court may use two standards that might hold the physician in this case liable.
The court might judge performance by determining how the same procedure is performed at another
hospital located in a similar locality. Under the similar locality rule, rural hospitals are compared to
other rural hospitals, urban hospitals to urban hospitals, and suburban hospitals to suburban hospitals.
However, courts today often use a national standard. Under the national standard, a nurse in
END CHAPTER THIRTY-TWO
