Which of the Following Is the Best Defense Auditors Can

question 11

Multiple Choice

Which of the following is the best defense auditors can assert in a suit for common law fraud based on their unqualified opinion on materially misstated financial statements?

• A)Contributory negligence on the part of the client.
• B)A disclaimer contained in the engagement letter.
• C)Lack of privity.
• D)Lack of scienter.

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Definitions:

Common-Size Income Statement

A common-size income statement presents all line items as a percentage of revenue, allowing for easier comparison across companies and time periods by standardizing financial statements.

Net Sales

The revenue from sales after deducting returns, allowances for damaged or missing goods, and discounts.

Round

In mathematics or financial contexts, to round means adjusting a number to a specified degree of precision, often to the nearest whole number or decimal place.

Current Ratio

Current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.