Kerry CPA Is the Auditor for Sammy Corp

question 33

Multiple Choice

Kerry CPA is the auditor for Sammy Corp.During the audit,Kerry discovers a material misstatement in Sammy's financial statements.Sammy's management tells Kerry that if the misstatement is corrected or if Kerry issues an opinion that indicates there is a material misstatement,Sammy Corp.will likely have to declare bankruptcy and thousands of employees will lose their jobs.Which of the following statements is true if the misstatement is not corrected and Kerry issues an unqualified opinion on Sammy's financial statements?

• A)Kerry is liable only to third parties in privity of contract.
• B)Kerry is liable only to known users of the financial statements.
• C)Kerry is likely liable to any person who suffered a loss as a result of the fraud.
• D)Kerry is likely liable to third parties even if the third parties were aware of the fraud and did not rely on the opinion.

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Definitions:

Describe

The act of giving a detailed account or picture of something in words, including all relevant characteristics, qualities, or events.

Explain

To make something clear or easy to understand by describing or giving information about it.

Behavioral School

A perspective in psychology focusing on observable behaviors and the ways in which learning influences behavior, discounting internal mental processes.

Watson

John B. Watson, an American psychologist who established the psychological school of behaviorism, emphasizing the importance of observable behaviors over internal phenomena like thoughts and emotions.