When Shareholders Use Audited Statements as the Basis for Their

question 34

True/False

When shareholders use audited statements as the basis for their investment decisions,court imposed policy has shaped the law to consider this use outside the intended statutory purpose of the audit.In so doing,the courts have allowed the professional to be released from any duty of care to these individuals for any investment losses incurred as a result of relying on the audit.

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Definitions:

Convergent-Divergent Theory

explores the ability to generate multiple solutions to a problem (divergent thinking) versus the ability to find the single best solution (convergent thinking).

Divergent Thinking

A thought process or method used to generate creative ideas by exploring many possible solutions.

Surprise and Stress

A state of unexpected occurrences impacting mental or physical strain and changes in the body or behavior.

Paradox of Minority Influence

A phenomenon where a smaller number within a group can influence the opinions or behaviors of the majority despite their smaller status.