Hark,CPA,negligently Failed to Follow Generally Accepted Auditing Standards in Auditing

question 27

Multiple Choice

Hark,CPA,negligently failed to follow generally accepted auditing standards in auditing Long Corporation's financial statements.Long's president told Hark that the audited financial statements would be submitted to several,at this point undetermined,banks to obtain financing.Relying on the statements,Third Bank gave Long a loan.Long defaulted on the loan.In jurisdiction applying the Ultramares decision,if Third sues Hark,Hark will:

• A)Win because there was no privity of contract between Hark and Third.
• B)Lose because Hark knew that a bank would be relaying the financial statements.
• C)Win because Third was contributory negligent in granting the loan.
• D)Lose because Hark was negligent in performing the audit.

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Definitions:

WAIS

The Wechsler Adult Intelligence Scale, a widely used test designed to measure cognitive ability in adults and older adolescents.

Progressive Matrices Test

A cognitive test involving nonverbal assessments designed to measure abstract reasoning and regarded as a non-verbal estimate of fluid intelligence.

Stanford-Binet IQ Test

A standardized test designed to measure human intelligence and cognitive abilities, originating from the early 20th century.

Administer

To manage or give out, often in the context of providing a test or a dose of medication.