As a Consequence of His Failure to Adhere to Generally

question 53

Multiple Choice

As a consequence of his failure to adhere to generally accepted auditing standards in the course of his examination of the Lamp Corp., Harrison, CPA, did not detect the embezzlement of a material amount of funds by the company's controller. As a matter of common law, to what extent would Harrison be liable to the Lamp Corp. for losses attributable to the theft?

• A) He would have no liability, since the ordinary examination cannot be relied upon to detect thefts of assets by employees.
• B) He would have no liability because privity of contract is lacking.
• C) He would be liable for losses attributable to his negligence.
• D) He would be liable only if it could be proven that he was grossly negligent.

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