What Is the Key to Limiting the Duty of Care

question 27

Multiple Choice

What is the key to limiting the duty of care owed by an auditor to third parties as defined by the foreseeability principle?

• A) a statutory prohibition against reliance by third parties
• B) the purpose of performing an audit is mandated by law
• C) a statutory amendment allowing limited liability partnerships
• D) a disclaimer against relying on information from third parties

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Definitions:

Machine Hour

A unit of measurement for the operational use of a machine, implying the total time a machine is functional and available for production.

Markup Percentage

The proportion of the cost of goods that is added to cover the overhead and profit, which sets the selling price.

Variable Cost

Costs that change in proportion to the level of production or sales activity, such as raw materials and direct labor.

Markup Percentage

The percentage added to the cost of goods to cover overhead and profit when setting the selling price.