When Courts Find Accountants Liable for Constructive Fraud, the Implication

question 74

Multiple Choice

When courts find accountants liable for constructive fraud, the implication is that:

• A) Auditors should always be liable when investors lose money due to deceit
• B) Accountants may be liable for fraud even when they had no knowledge of deceit
• C) Auditors should be able to detect all deceit by management
• D) Accountants may be held liable even to third parties to whom they did not have a duty

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Definitions:

Investing Activities

Financial transactions and decisions related to acquiring or disposing of long-term assets and investments that can affect a company's capital structure.

Cash Inflow

Refers to the money received by a business from its various activities, including sales, investments, and financing.

Inventory

The goods and materials a business holds for the purpose of resale or production.

Suppliers

Businesses or individuals that provide goods or services to another entity under agreed-upon terms.