Smith Corp

question 25

Essay

Smith Corp.orally engaged TRA CPAs, to audit its financial statements.The management of Smith Corp.informed TRA CPAs that it suspected that the accounts receivable was materially overstated.Although the financial statements audited by TRA CPAs did, in fact, include a materially overstated accounts receivable balance, TRA issued an unqualified opinion.Smith Corp then relied on the financial statements in deciding to obtain a loan from Town Bank to expand its operations and Town Bank relied on the financial statements in making the loan to Smith Corp.As a result of the overstated accounts receivable balance, Smith Corp.has defaulted on the loan and has incurred a substantial loss.If Smith Corp sues TRA CPAs for negligence in failing to discover the overstatement, what is TRA CPA's best defense?

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Definitions:

Nonprofit Chief Executives

Individuals at the highest leadership position within nonprofit organizations, responsible for overseeing operations, strategy, and achieving the mission.

Board Of Directors

A group of individuals elected to represent shareholders and oversee the activities and strategic direction of a company or organization.

Personality

The combination of characteristics or qualities that form an individual's distinctive character, influencing behaviors and attitudes.

Board Of Directors

A group of individuals elected to represent shareholders or members, responsible for governing an organization's activities, setting strategic direction, and making major decisions.