The Ultramares Doctrine,as Created by Justice Cardozo in Ultramares Corporation

question 40

Multiple Choice

The Ultramares doctrine,as created by Justice Cardozo in Ultramares Corporation v.Touche,states that:

• A) a third party may hold an accountant liable for negligence, but only if they have a direct contractual relationship with the accountant and/or the accounting firm.
• B) a third party may hold an accountant liable for negligence when the accountant prepares a client audit he or she knows is specifically intended for use by the third party.
• C) a third party may hold an accountant liable for negligence when the accountant prepares an audit for his or her client, regardless of whether the accountant knows the audit is specifically intended for use by the third party.
• D) a third party may hold an accountant liable for negligence, but only if the engagement agreement with the client contains a general release stating that the client may use the audit for whatever purposes the client wishes.
• E) contractual relationships and knowledge of use or intended use are irrelevant issues, because an accountant and/or accounting firm, as professionals, will be liable for any damages caused by their negligence, whether foreseeable or not.

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Definitions:

Profit-maximizing

Profit-maximizing is the process or goal of a business to operate in a way that achieves the highest possible profit.

Total Revenue

The total amount of money received by a company from its sales or services before any expenses are subtracted.

Profit-maximizing

A strategy or process that firms adopt to determine the price, output level, and input use that leads to the highest possible profit.

Average Total Cost

Calculated by dividing total cost by the quantity of output produced; it's the cost of producing the average unit of output.