Which of the Following Is Not Required for Establishing an Auditor's

question 16

Multiple Choice

Which of the following is not required for establishing an auditor's liability for negligence?

• A)An undetected material misstatement.
• B)Failure to exercise due care.
• C)A connection between the auditor's negligence and a plaintiff's loss.
• D)A duty to conform to a standard of care.

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Definitions:

Market Risk Premium

The difference between the expected return on a market portfolio and the risk-free rate.

Stock Prices

The present rate at which a corporation's stock share is available for purchase or sale on the market.

Small-Firm Effect

The small-firm effect refers to the historical trend where smaller firms, in terms of market capitalization, have achieved higher risk-adjusted returns than larger companies.

Random Price Movements

Refers to the unpredictability in the price changes of securities in financial markets, often driven by a variety of factors without a clear pattern.