Which of the Following Is an Illustration of Liability Under

question 114

Multiple Choice

Which of the following is an illustration of liability under the federal securities acts?

• A) A client sues the auditor for not discovering a theft of assets by an employee.
• B) A bank sues the auditor for not discovering that the borrower's financial statements are misstated.
• C) A combined group of stockholders sues the auditor for not discovering materially misstated financial statements.
• D) The auditor sues a client for not cooperating during the engagement.

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Definitions:

Conditioned Response

The learned reaction to a previously neutral stimulus, brought about by conditioning.

Reflex

An automatic, involuntary response to a stimulus that does not involve conscious thought, designed to protect the body.

Maturation

Changes that occur according to one’s genetically determined biological timetable of development.

Learning

A process that induces changes in knowledge, behaviors, or attitudes through experience, practice, or study.