While Conducting an Audit of a Public Entity,Wallace Failed to Identify

question 36

Multiple Choice

While conducting an audit of a public entity,Wallace failed to identify material misstatements in its client's financial statements.Investors then sued Wallace in connection with this audit.Which of the following would not need to be demonstrated in order for the shareholders to successfully bring suit against Wallace?

• A)Wallace was in privity with the shareholders.
• B)The shareholders relied upon the materially misstated financial statements.
• C)Wallace acted with gross negligence in his audit.
• D)The reliance on the materially misstated financial statements caused the shareholders' losses.

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Definitions:

Methodological Problem

Challenges or complications in the process and design of research or experimental studies.

Correlational Research

A type of non-experimental research method that involves observing two variables to determine if there is a relationship between them.

Experimental Research

Experimental research is a scientific study where the researcher manipulates one variable to determine if it causes a change in another variable, applied within controlled conditions.

Alcohol

A chemical substance that can alter mood and behavior, typically found in drinks such as beer, wine, and spirits.