Which of the Following Statements Is True of Liability to Third

question 22

Multiple Choice

Which of the following statements is true of liability to third persons?

• A) Contract law has been widely used by third persons suffering damages as a result of an accountant's breach in the absence of special circumstances.
• B) At common law, recovery by a creditor was not permitted on the theory that the creditor was a third-party beneficiary of the contract employing the accountant.
• C) Common law required showing that the accountant was aware that the audit was ordered to satisfy the demand of a creditor or prospective creditor.
• D) Historically, third-party suits against accountants were generally permitted by the privity doctrine.

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Definitions:

Monthly Standard Deviation

A statistical measure that represents the variability or volatility of an asset's returns over a month.

Market Rate of Return

The average rate of return anticipated by investors in the overall market for a particular investment category.

Collection Float

The time period between when a check is deposited and when it is cleared and the funds are available.

Outstanding Cheques

Checks that have been written and recorded in the issuer's financial statements but have not yet been cashed or cleared by the bank.