Stan Is an Independent Public Accountant

question 97

Essay

Stan is an independent public accountant.He is hired by Raustus,Inc.to prepare financial statements for the company.Raustus uses these statements to obtain investors for the company.It provides copies of the financial statements to potential investors.While preparing the financial statements,Stan commits some errors,which misstate the true financial position of Raustus.One of the investors discovers this and files a lawsuit.What are the factors that determine Stan's liability?

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Definitions:

Goodwill

Goodwill is an intangible asset that arises when a company acquires another business for more than the fair value of its net identifiable assets.

NCI

Non-Controlling Interest, which refers to the equity in a subsidiary not attributable, directly or indirectly, to the parent company.

Common Shares

Equity securities representing ownership in a company, giving holders voting rights and a share in the company's profits via dividends.

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and adjusted for the investor’s share of the investee’s profit or loss.