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.

Identify the stages of moral development and how they influence ethical decision making.

Understand the concept of stakeholder pressures and their impact on organizational decision making.

Learn about different strategies and measures companies adopt to foster ethical behavior and diversity.

Grasp the concept of ethical intensity and its factors influencing ethical decision making.

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Definitions:

Binding Arbitration

An arbitration agreement where the decision made by the arbitrator is legally binding and enforceable, similarly to a court judgment.

Distress

Seizure by a landlord of any property left by a tenant and holding it until the rent is paid or selling it to pay rent owing.

Relief against Forfeiture

Judicial intervention to protect against the loss of rights or property due to failure to meet legal obligations.

Tenancy at Sufferance

A situation where a tenant continues to occupy property after the expiration of a lease, without the landlord's consent but without facing eviction.