While Conducting an Audit of a Public Entity,Wallace Failed to Identify

question 108

Multiple Choice

While conducting an audit of a public entity,Wallace failed to identify material misstatements in its client's financial statements.Investors then sued Wallace in connection with this audit.Which of the following would not need to be demonstrated in order for the shareholders to successfully bring suit against Wallace?

• A) Wallace was in privity with the shareholders.
• B) The shareholders relied upon the materially misstated financial statements.
• C) Wallace acted with gross negligence in the audit.
• D) The reliance on the materially misstated financial statements caused the shareholders' losses.

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