A Broad Interpretation of the Rights of Third-Party Beneficiaries Holds

question 15

Multiple Choice

A broad interpretation of the rights of third-party beneficiaries holds that users whom the auditor should have been able to foresee as being likely users of financial statements have the same rights as those with privity of contract. This is known as the concept of

• A) foreseen users.
• B) foreseeable users.
• C) expected users.
• D) four-party contracts.

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Definitions:

Dividends

The portion of a company's earnings distributed to shareholders, usually in the form of cash or additional stock.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often receiving dividends before common shareholders.

Voting Privileges

Rights granted to shareholders to vote on company decisions, often proportional to the number of shares owned.

Organization Expenses

Costs associated with starting and organizing a business or company, which may include legal fees, registration fees, and promotional expenses.