Which of the Following Is Not a Valid Defense for Auditors

question 125

Multiple Choice

Which of the following is not a valid defense for auditors' liability to third parties for ordinary negligence under common law?

• A) The loss was caused by factors other than the materially misstated financial statements.
• B) The third parties lack the proper standing (relationship) to bring suit in that jurisdiction.
• C) The third parties lack a privity relationship with auditors.
• D) The third parties did not rely upon the financial statements.

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Definitions:

Other Things Equal

A Latin term (ceteris paribus) used in economics to signify examining the effect of one changing factor when all other factors remain constant.

Normative Economic Statement

An opinion or judgment that reflects values or what ought to be, rather than factual claims about what is.

Social Security

A government program designed to provide financial support to individuals during retirement, disability, or upon the death of a primary wage earner.

Government

The system or group of people governing an organized community, often a state, including institutions that establish and enforce public policies and laws.