Sun CorpApproved a Merger Plan with Cord Corp

question 28

Multiple Choice

Sun Corp.approved a merger plan with Cord Corp.One of the determining factors in approving the merger was the financial statements of Cord that were audited by Frank & Co.,CPAs.Sun had engaged Frank to audit Cord's financial statements.While performing the audit,Frank failed to discover certain irregularities that later caused Sun to suffer substantial losses.For Frank to be liable under common law liability,Sun at a minimum must prove that Frank

• A)Knew of the irregularities.
• B)Failed to exercise the appropriate level of professional care.
• C)Demonstrated gross negligence.
• D)Acted with scienter.

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Definitions:

Cash Dividends

Payments made by a corporation to its shareholders from earnings, usually in the form of cash.

Direct Method

A methodology applied in cash flow statements to present major classes of gross cash receipts and payments, offering a clear view of cash flow from operating activities.

Current Asset

Assets that are expected to be converted into cash, sold, or consumed within one year or a business cycle, whichever is longer.

Current Liability

A company's debts or obligations that are due within one year or within the normal operating cycle.