When an Accountant Negligently Prepares a Financial Statement Knowing That

question 32

Multiple Choice

When an accountant negligently prepares a financial statement knowing that the client intends to use it in obtaining a loan from a bank, the accountant will be liable to whichever lender actually makes the loan under the __________rule.

• A) known user
• B) contact
• C) foreseeable user.
• D) privity

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Definitions:

Direct Labor Costs

Expenses associated with the wages and benefits of employees who are directly involved in the production of goods or services.

Budgeted Manufacturing Overhead

Budgeted manufacturing overhead is the estimated amount of indirect costs that are expected to be incurred in the manufacturing process during a specified period.

Direct Labor-hour

A measure of the total amount of time worked by employees directly involved in manufacturing a product or providing a service.

Budgeted Manufacturing Overhead

The estimated overhead costs a company anticipates for manufacturing activities within a specified budget period, used for planning and control purposes.