Kerry CPA Is the Auditor for Sammy Corp

question 33

Multiple Choice

Kerry CPA is the auditor for Sammy Corp.During the audit,Kerry discovers a material misstatement in Sammy's financial statements.Sammy's management tells Kerry that if the misstatement is corrected or if Kerry issues an opinion that indicates there is a material misstatement,Sammy Corp.will likely have to declare bankruptcy and thousands of employees will lose their jobs.Which of the following statements is true if the misstatement is not corrected and Kerry issues an unqualified opinion on Sammy's financial statements?

• A)Kerry is liable only to third parties in privity of contract.
• B)Kerry is liable only to known users of the financial statements.
• C)Kerry is likely liable to any person who suffered a loss as a result of the fraud.
• D)Kerry is likely liable to third parties even if the third parties were aware of the fraud and did not rely on the opinion.

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Definitions:

Sales Budget

An estimation of future sales revenues, often broken down by month or quarter, used for planning and operational purposes.

Ending Inventory

Ending Inventory is the total value of goods available for sale at the end of an accounting period, calculated by adding purchases to beginning inventory and subtracting goods sold.

Cash Receipts

The collection of money, including cash, checks, and credit card payments, by a business during a given period.

Sales Budget

A financial plan that estimates future sales volumes and revenues for a specific period.