Simpson & Associates Issued an Unmodified Auditor's Opinion on the Financial

question 22

Multiple Choice

Simpson & Associates issued an unmodified auditor's opinion on the financial report of Ridge Ltd (Ridge) .Simpson & Associates did not detect material misstatements in the financial report as a result of negligence in the performance of the audit.Based upon the financial report, Clark purchased shares in Ridge.Shortly afterwards, Ridge became insolvent, causing the price of the shares to decline drastically.Clark has commenced legal action against Simpson amp; Associates for damages.Simpson & Associates' best defence to such an action would be that:

• A)Clark lacks a contractual relationship as a basis to sue.
• B)the engagement letter specifically disclaimed all liability to third parties.
• C)there is no proof of proximity.
• D)there has been no subsequent sale of the shares for which a precise loss can be calculated.

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Definitions:

Total Utility

The total satisfaction received from consuming a certain quantity of goods or services.

Total Utility

The total satisfaction or benefit received by consuming a given total quantity of a good or service.

Marginal Utility

Marginal utility is the additional satisfaction a consumer gains from consuming one more unit of a good or service.

Diminishing Marginal Utility

Diminishing marginal utility is an economic principle stating that as a person consumes more of a good or service, the satisfaction (utility) gained from each additional unit decreases.