An Accounting Firm Made Serious Errors in Providing Audited Financial

question 8

Multiple Choice

An accounting firm made serious errors in providing audited financial statement to ABC Limited. These statements are used by management, shareholders, and potential shareholders.

• A) Potential shareholders who relied on these statements may succeed in suing the accounting firm in contract if the accounting firm has not acted according to the reasonable-person standard
• B) Potential shareholders who relied on these statements may succeed in suing the accounting firm in negligence if the accounting firm has not acted according to the standard set for accounting firms
• C) Potential shareholders who relied on these statements may succeed in suing the accounting firm in contract if the accounting firm has not acted according to the standard set for accounting firms
• D) Potential shareholders who relied on these statements may succeed in suing the accounting firm in negligence if the accounting firm has not acted according to the reasonable-person standard

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Definitions:

Consistency

The quality of always acting or behaving in the same way, leading to predictable and reliable outcomes or performances.

Conditioned Response

A learned reaction to a specific stimulus that occurs after repeated exposure to that stimulus.

Neutral Stimulus

A stimulus that initially produces no specific response other than focusing attention; in conditioning, it becomes associated with an unconditioned stimulus.

Unconditioned Stimulus

In classical conditioning, a stimulus that naturally and automatically triggers a response without prior conditioning.