The Two Cases That Formed the Basis for Most Subsequent

question 31

Multiple Choice

The two cases that formed the basis for most subsequent decisions as to the determination of auditor negligence were:

• A) Hedley Byrne and AWA.
• B) JEB Fasteners and Twomax.
• C) Caparo Industries and Esanda.
• D) Kingston Cotton Mill and London and General Bank.

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Definitions:

Accrual Basis

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when the cash is actually received or paid.

Indirect Method

A way of preparing the cash flow statement, where net income is adjusted for non-cash transactions and changes in working capital.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the asset's consumption or wear and tear.

Accounts Receivable

Outstanding payments from customers for goods or services rendered by a company which have not been settled yet.