Homework 8th edition Chapter 17

Homework 8th edition Chapter 17 - Multiple Choice...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Multiple Choice Questions: 17-29. b. (auditor and legal counsel share damages ¾ and ¼ under joint and several liability) 17-30. d. 17-31. c. 17-32. b. 17-33. a. 17-34. c. 17-35. c. 17-36. c. 17-37. d. 17-38. b . 17-39. d. 17-40. e. 17-41. a. The plaintiff would win because the plaintiff is a primary beneficiary and meets the identified user test. b. The plaintiff would win only if the court uses the foreseeable users test. c. The plaintiff would win only if the court uses the foreseen users test. d. The plaintiff would not win. Scienter must be proven. e. Under the 1933 Act, the auditor must prove that he or she was not negligent, that the financial statements were not materially misstated or misleading, or that his or her actions did not cause the plaintiff's loss. The plaintiff needs only to allege that the financial statements were materially misstated or misleading. If these defenses fail, the auditor is liable under the 1933 Act. 17-42. a. Under the Ultramares precedent, the auditor is liable for negligence only to third parties who are the primary beneficiary of the audit as specified in the engagement letter. Under the Credit Alliance precedent, the auditor is liable for negligence to identified users. This is broader than Ultramares because the user does not have to be specified in a contract. Rather, the auditor will be held liable if the auditor has knowledge of the user and that the user will be utilizing the audited financial statements for a specific economic action such as loaning money to the client. Under the Restatement , the auditor is liable to foreseen third parties, which includes an unknown member of a known group of potential users for which the audited financial statements will be used for a specific economic action.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Under the Rosenblum case, the auditor is liable to foreseeable users. This is the broadest interpretation because it refers to "classes of users." The auditor is under no obligation to know the specific users of financial statements to be held liable. Auditors prefer the approach under the
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

Homework 8th edition Chapter 17 - Multiple Choice...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online