Sumanthra,an Accountant,prepared Financial Statements for ZeeTech Ltd

question 72

Multiple Choice

Sumanthra,an accountant,prepared financial statements for ZeeTech Ltd.A cutting edge technology company,ZeeTech was actively seeking private investment in order to finance a new electronics device.Despite the fact that Sumanthra followed Generally Accepted Accounting Principles (GAAP) ,the statements she prepared were misleading.Arif and Alena,both potential investors,relied on the statements Sumanthra had prepared.As a result of their reliance,Arif and Alena both invested in ZeeTech and lost a considerable sum of money.Independently,Arif and Alena decided to sue Sumanthra for their financial loss.Which of the following is true?

• A) Sumanthra will not escape liability because accountants are automatically liable for losses arising from the use of financial statements they prepare.
• B) Sumanthra will not escape liability simply because she followed GAAP.
• C) Sumanthra has nothing to worry about, because an accountant who follows GAAP could not have breached the standard of care.
• D) Sumanthra has nothing to worry about, because accountants are immune from liability.
• E) Sumanthra has nothing to worry about, because negligence requires proof of more than mere financial loss.

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Definitions:

Joint Tenancy

A form of co-ownership where two or more individuals hold equal shares in a property, with the right of survivorship.

Life Insurance

A contract between an insurance policyholder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person.

Patient Self-Determination Act

A federal legislation that ensures patients in healthcare facilities receive information about their rights, including advance directives and the refusal of medical treatment.

Health Care Providers

Entities, including professionals and organizations, that offer medical services to treat and manage patients' health.