Nast CorpOrally Engaged Baker & Co

question 4

Multiple Choice

Nast Corp.orally engaged Baker & Co. ,CPAs,to audit its financial statements.The management of Nast informed Baker that it suspected the accounts receivable were materially overstated.Although the financial statements audited by Baker did,in fact,include a materially overstated accounts receivable balance,Baker issued an unqualified opinion.Nast relied on the financial statements in deciding to obtain a loan from Century Bank to expand its operations.Nast has defaulted on the loan and has incurred a substantial loss.If Nast sues Baker for negligence in failing to discover the overstatement,Baker's best defense would be that:

• A)Baker did not perform the audit recklessly or with an intent to deceive.
• B)Baker was not in privity of contract with Nast.
• C)Baker performed the audit in accordance with generally accepted auditing standards.
• D)Nast orally engaged Baker and Baker did not sign an engagement letter.

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Definitions:

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A term that refers to the racial profiling and disproportionate stopping of African American drivers by police based on their race.

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Statistical data relating to the population and particular groups within it, often analyzed for social and economic research.

Minority

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Tolerant

Having a fair, objective, and permissive attitude towards those whose opinions, beliefs, practices, racial or ethnic origins, etc., differ from one's own.