While Conducting an Audit,Larson Associates,CPAs,failed to Detect Material Misstatements Included

question 46

Multiple Choice

While conducting an audit,Larson Associates,CPAs,failed to detect material misstatements included in its client's financial statements.Larson's unqualified opinion was included with the financial statements in a registration statement and prospectus for a public offering of securities made by the client.Larson knew that its opinion and the financial statements would be used for this purpose.In a suit by a purchaser against Larson,Larson's best defense would be that the

• A) audit was conducted in accordance with generally accepted auditing standards.
• B) client was aware of the misstatements.
• C) purchaser was not in privity of contract with Larson.
• D) identity of the purchaser was not known to Larson at the time of the audit.

---

Definitions:

Constricts

To narrow or become tighter, often referring to the narrowing of blood vessels or other tubular structures.

Accommodation Reflex

The process by which the eye changes optical power to maintain a clear image or focus on an object as its distance varies.

Photopupillary Reflex

The reflex constriction of the pupils when the eyes are exposed to bright light.

Parasympathetic Division

A branch of the autonomic nervous system responsible for conserving energy and lowering the heart rate, among other functions, often referred to as the "rest and digest" system.