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

question 36

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 his audit.
• D)The reliance on the materially misstated financial statements caused the shareholders' losses.

---

Definitions:

Dorsal Surface

The back side of the body in animals, opposite of ventral; often refers to the upper side.

Latissimus Dorsi

A broad, flat muscle on the back that helps in movement of the shoulder and the upper arm.

Trapezius Group

A collection of muscles in the upper back and neck region, responsible for moving the shoulder blades and extending the neck.

Brachiocephalic

Referring to the brachiocephalic artery or vein, critical vessels that supply blood to the right arm, neck, and head.