PA Was Engaged by Microcomputer Distributor Limited (MDL)to Conduct a Review

question 2

Multiple Choice

PA was engaged by Microcomputer Distributor Limited (MDL) to conduct a review engagement.The financial statements are used primarily by the shareholders,management,and by the bank.Recently,an employee was fired for stealing computer parts,primarily chips and boards that could easily be placed in a pocket.MDL is suing PA because they believed that audit procedures,such as counting inventory,would have detected this fraud.What is PA's best defence?

• A)absence of causal connection
• B)lack of negligence
• C)contributory negligence
• D)duty of care not required

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Definitions:

Excess Supply

A situation where the quantity of a good or service supplied is greater than the quantity demanded at a given price.

Equilibrium

A state where supply equals demand, allowing the market for a good or service to stabilize at a certain price and quantity.

Price Elasticity of Demand

A measure that calculates the responsiveness, or elasticity, of the quantity demanded of a good to a change in its price.

Price Ceiling

A government-imposed limit on the price charged for a product, intended to prevent prices from rising too high.