Which of the Following Is Not a Valid Defense for Auditors

question 23

Multiple Choice

Which of the following is not a valid defense for auditors' liability to third parties for ordinary negligence under common law?

• A)The loss was caused by factors other than the materially misstated financial statements
• B)Lack of proper standing (relationship)to bring suit in that jurisdiction.
• C)Lack of a privity relationship with auditors
• D)Third parties did not rely upon the financial statements

---

Definitions:

Average Rate of Return

A method of determining the profitability of an investment by dividing the average annual profit by the initial investment cost.

Total Income

The sum of all revenues and gains that a person or business receives over a period of time, before any expenses are subtracted.

Average Rate of Return

A metric that determines the earnings from an investment by dividing the mean yearly profit by the cost of the initial investment.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts.