While Conducting an Audit,Larson Associates,CPAs,failed to Detect Material Misstatements Included

question 45

Multiple Choice

While conducting an audit,Larson Associates,CPAs,failed to detect material misstatements included in its client's financial statements.Larson's unqualified opinion was included with the financial statements in a registration statement and prospectus for a public offering of securities made by the client.Larson knew that its opinion and the financial statements would be used for this purpose.In a suit by a purchaser against Larson,its best defense would be that the

• A) Audit was conducted in accordance with generally accepted auditing standards.
• B) Client was aware of the misstatements.
• C) Purchaser was not in privity of contract with Larson.
• D) Larson did not know the identity of the purchaser at the time of the audit.

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Definitions:

Microfilaments

Small, rod-like structures present in the cytoplasm of all eukaryotic cells, composed mainly of the protein actin, and involved in various forms of cell movement and in the maintenance of the cell's shape.

Rodlike Structures

Any elongated, cylindrical shapes or components found in biological organisms or cells, often referring to the physical structure of certain proteins or cellular organelles.

Actin

The protein of which microfilaments consist. Actin, together with the protein myosin, is responsible for muscle contraction.

Rough Endoplasmic Reticulum

A region of the endoplasmic reticulum associated with ribosomes, involved in the synthesis and processing of proteins.