Hark,CPA,failed to Follow Generally Accepted Auditing Standards in Auditing Long

question 60

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.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.