In a Common Law Action Against Auditors,lack of Privity Is

question 40

Multiple Choice

In a common law action against auditors,lack of privity is a viable defense if the plaintiff

• A) Is the client's creditor who sues auditors for ordinary negligence.
• B) Can prove auditors' gross negligence that amounts to a reckless disregard for the truth.
• C) Is the auditors' client.
• D) Bases the action upon fraud.

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Definitions:

Apparent Authority

A situation in which a reasonable person would understand that an agent had the authority to act, even if the agent didn't have such authority.

Express Agency

An agency relationship formed by explicit oral or written agreement between the agent and the principal.

Implied Agency

A situation where an agency relationship is inferred from the actions of the parties rather than an explicit agreement.

Constructive Trust

A legal remedy imposed by a court to rectify situations where someone wrongfully holds property they should not benefit from.