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:

Mucus-Thinning Drugs

Medications designed to reduce the viscosity of mucus, helping to alleviate congestion in the respiratory tract.

Vocal Cords

Paired bands of muscle tissue located in the larynx (voice box) that vibrate to produce sound when air is expelled from the lungs.

Epiglottis

A leaf-shaped flap in the throat that prevents food and drink from entering the windpipe during swallowing.

Tension

A physical or psychological state of being stretched tight which can refer to the force applied to something or a feeling of strain and anxiety.