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BUSI 3705U (10)
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Chapter 22

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BUSI 3705U

Chapter 22 Legal Environment of Business Professional Services Professional - Someone engaged in an occupation, usually governed by a professional body, requiring the exercise of specialized knowledge, education and skill - Professions/client relation is a special relationship of trust and loyalty - Professionals are held to a high standard than other service providers Ethical Obligations - Rules of professional conduct and codes of ethics of their professional bodies - Level of independence is created that distinguishes a professional employee from a manager Responsibilities of Professionals Responsibilities in Contract - Retainer→ advance payment required to fund services to be provided and thereby minimize the professional’s exposure to risk - Contractual terms are negotiated and both professional and client must comply with the terms of the contract - Professional service contracts → client must address key terms of contract prior to engaging a professional’s service Fiduciary Responsibilities - Fiduciary →person who has an obligation to act primarily in the interest of the person to whom responsibility is owed - Professional act in a fiduciary capacity and are deemed by law to owe duties of loyalty, trust and confidence that go beyond those contractual or tort responsibilities owed by the nonprofessional service provider - The professional’s fiduciary responsibilities include: o Avoiding conflict of interest between the client’s affairs and those of the professional or the firm o Refrain from using position for personal profit beyond charging a reasonable fee o Follow the client’s instructions o Disclose all relevant information to the client o Act honestly, in good faith and with due care o Maintain confidentiality of client information Duty of Confidentiality - The obligation of a professional not to disclose any information provided by the client without the client’s consent - Professionals must maintain both fiduciary principles and professional rules of conduct Privilege - The professional’s right not to divulge a client’s confidential information to third parties Responsibilities in Tort - For a professional to be liable for negligence, claimant musts prove: o The professional owes the claimant a duty of care o Professional has breached the standard of care o Professional’s conduct has caused the claimant’s loss o The claimant’s loss is not too remote from the professional’s action Responsibilities to Third Parties - Negligent Misstatement o The courts have recognized third-party claims for economic loss resulting from negligent misrepresentations o Remain a contentious and controversial issue, particularly in the context of an audit o Canadian Accounting Standards Board announced that international Finance Reporting Standards will replace Canadian GAAP in 2011 and the Canadian Institute Chartered Accountants has issued guidelines for climate change disclosure Chapter 22
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