Hark, CPA, Failed to Follow Generally Accepted Auditing Standards in Auditing

question 38

Multiple Choice

Hark, CPA, failed to follow generally accepted auditing standards in auditing Long Corp.'s financial statements. Long's management had told Hark that the audited statements would be submitted to several banks to obtain financing. Relying on the statements, Third Bank gave Long a loan. Long defaulted on the loan. In a jurisdiction applying the Ultramares doctrine, if Third sues Hark, Hark will

• A) Win because there was no privity of contract between Hark and Third.
• B) Lose because Hark knew that banks would be relying on the financial statements.
• C) Win because there was contributory negligence on the part of Third in granting the loan.
• D) Lose because Hark was negligent in performing the audit.

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Definitions:

Intelligence

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