Which of the Following Is Not a Valid Defense for Auditors

question 23

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)Lack of proper standing (relationship)to bring suit in that jurisdiction.
• C)Lack of a privity relationship with auditors
• D)Third parties did not rely upon the financial statements

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Definitions:

Income Statement

A financial statement showing a company's revenue, expenses, and profits over a specific period.

Balance Sheet

A financial statement that showcases a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of the company's financial condition.

Stockholders' Equity

Stockholders' equity is the residual interest in the assets of an entity after deducting liabilities, representing ownership equity spread among shareholders.

Statement of Cash Flows

This document explains how alterations in balance sheet accounts and profitability influence cash and equivalents, with the analysis divided into operational, investment, and financial activities.