The Credit Alliance V

question 3

Multiple Choice

The Credit Alliance v.Arthur Andersen & Co.case established three tests that must be satisfied for holding auditors liable for negligence to third parties.All of the following are tests described EXCEPT

• A)Knowledge by the accountant that the financial statements are to be used for a particular purpose.
• B)The intention of the third party to rely on those statements.
• C)Some action by the accountant linking him or her to the third party that provides evidence of the accountant's understanding of intended reliance.
• D)The identity of the third party must be directly known to the auditor.

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Definitions:

Good Quality Product

A product that meets or exceeds the expectations of its users in terms of performance, durability, and reliability.

Dominant Strategy

A strategy in game theory that yields the best payoff for a player no matter what the other players do.

Combined Profit

The aggregate profit earned by combining the net incomes of two or more entities, businesses, or investment sources.

Nash Equilibrium

An idea in game theory where the strategy chosen by each player is the best option, taking into account the strategies adopted by all other participants in the game.