An Accountant Who Is Being Sued by a Third Person

question 25

Multiple Choice

An accountant who is being sued by a third person for malpractice based on fraud will be able to avoid liability if the accountant can show:

• A) contributory negligence on the part of the plaintiff.
• B) that an exculpatory clause applies.
• C) that the plaintiff did not rely on the false statement.
• D) the absence of privity of contract.

---

Definitions:

Net Income

It refers to the bottom line of a company's income statement, indicating the earnings after all deductions.

Noncash Activities

Financial transactions that do not involve the immediate transfer of cash, often reflected in supplemental disclosures in cash flow statements.

Financing Activities

Transactions involving changes in equity and long-term liabilities on the company's balance sheet.

Statement of Cash Flows

A financial report that provides aggregate data regarding all cash inflows and outflows a company receives.