1. TYPISTS: Essay answers must be double spaced, using 12 point type size. The page
limit for your essay answers to this examination are 8 pages per essay answer, 24 pages
total for all essay answers. Put your student ID at the top of page 1. Do not put your
name anywhere in your answer.
2. WRITERS: Essay answers must be written on lined paper, 8 1/2″ by 11″, double-
spaced. You have double the page limits stated for Typists in paragraph 1 above for
essay answers. You must submit a legible scanned or photographed copy of your
handwritten paper. Put your student ID at the top of page 1. Do not put your name
anywhere in your answer.
3. You are prohibited from discussing any aspect of the exam with any UWLA student
or other individual, or entity, under any circumstances or conditions, until the end of the
examination period.
4. Your answers must be returned by email in a Microsoft Word document or PDF
within a twenty-four (24) hour period per exam. (i.e., one exam in twenty-four (24) hours,
two exams in forty-eight (48) hours, and so on) to the Registrar, .
5. For Bar-tested subjects, to emulate the California Bar Examination, it is
recommended, but not required, that for an examination like this you limit yourself to
three hours total.
Your Essay answers should demonstrate your ability to analyze the facts in the
questions, to tell the difference between material facts and immaterial facts, and to
discern the points of law and fact upon which the case turns. Your answers should show
that you know and understand the pertinent principles and theories of law, their
qualifications and limitations, and their relationships to each other.
Your answers should evidence your ability to apply the law to the facts and to reason in
a logical and lawyer-like manner from the premises you adopt to a sound conclusion.
Do not merely show that you remember legal principles. Instead try to demonstrate
your proficiency in using and applying them.
If your answers contain only a statement of your conclusions, you will receive little
credit. State fully the reasons that support your conclusions and discuss all points
thoroughly.
Your answers should be complete, but you should not volunteer information or discuss
legal doctrines which are not pertinent to the solution of the problem.
Question 1
Alfred is in the business of construction of new homes and has been seeking
substantial additional financing to grow his business. Alfred knows that he must grow his
business and increase revenue or face inevitable failure. Alfred has been unsuccessful in
trying to secure private financing for the expansion of his business, and he is left with no
alternative but to seek financing from banks. Alfred prepared a profit and loss statement
which included nonexistent contracts and accounts receivable in the sum of $1,000,000.00.
Alfred approached a number of banks to obtain loans; however, the banks declined to give
him any loans without an audit by an independent public accountant.
Magic Accountancy Company, a firm of accountants, had been performing
bookkeeping and accounting work for Alfred for a number of years. Alfred asked Magic
Accountancy Company to audit and certify the profit and loss statement. Alfred informed
Magic Accountancy Company that he intended to submit the certified profit and loss
statement only to Titan Bank for the purpose of obtaining a loan. Magic Accountancy
Company never had any previous business dealings with Titan Bank.
Magic Accountancy Company proceeded to audit the profit and loss statement and
discovered that it reflected non-existent contracts and accounts receivables in the sum of
$1,000,000.00. Magic Accountancy Company informed Alfred that they had discovered that
he had included nonexistent contracts and accounts receivable on his profit and loss
statement. Alfred informed Magic Accountancy Company that if they did not certify the
profit and loss statement, they would be replaced by another accountancy firm.
Magic Accountancy Company did not want to lose Alfred’s business and after a
great deal of consideration, Magic Accountancy Company decided to certify Alfred’s profit
and loss statement. Alfred proceeded to submit the certified profit and loss statement to
Titan Bank. Titan Bank was being audited by the Security and Exchange Commission for
violation of banking regulations. The audit led to the Securities and Exchange Commission
terminating the operations of Titan Bank. Alfred without any further communication with
Magic Accountancy Company submitted the certified profit and loss statement to Friendly
Bank. Friendly Bank, in reliance upon Magic Accountancy Company’s audit and certification
of the profit and loss statement, made a $1,000,000.00 loan to Alfred.
Despite the loan, Alfred’s financial struggles continued and he was eventually forced
into bankruptcy. Alfred’s bankruptcy resulted in Friendly Bank suffering a $1,000,000.00
loss.
Discuss the rights of Friendly Bank, if any, against Magic Accountancy Company.
