Which of the Following Is the Best Defense That Auditors

question 68

Multiple Choice

Which of the following is the best defense that auditors can assert in a suit for common law fraud based on their unqualified opinion on materially misstated financial statements?

• A) Contributory negligence on the part of the client.
• B) A disclaimer contained in the engagement letter.
• C) Lack of privity.
• D) Lack of scienter.

---

Definitions:

403b Plan

A 403b plan is a tax-advantaged retirement savings plan available to employees of public education organizations, some non-profit employers, and certain ministers, similar to a 401(k) plan.

Municipal Bond

A debt security issued by a city, municipality, or county to finance its capital expenditures, typically offering tax-exempt interest payments.

Corporate Bond

A debt security issued by corporations to finance their operations, which promises to pay the holder a specified rate of interest and return the principal at maturity.

Tax Bracket

A range of incomes taxed at a certain rate within a tax system, where the tax rate typically increases as income rises.