While Conducting an Audit, Larson Associates, CPAs, Failed to Detect

question 55

Multiple Choice

While conducting an audit, Larson Associates, CPAs, failed to detect material misstatements included in its client's financial statements. Larson's unqualified opinion was included with the financial statements in a registration statement and prospectus for a public offering of securities made by the client. Larson knew that its opinion and the financial statements would be used for this purpose. In a suit by a purchaser against Larson for common-law negligence, Larson's best defense would be that the:

• A)audit was conducted in accordance with generally accepted auditing standards.
• B)client was aware of the misstatements.
• C)purchaser was not in privity of contract with Larson.
• D)identity of the purchaser was not known to Larson at the time of the audit.

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Definitions:

Relationship Between Variables

The way in which two or more variables are associated with one another, which can be positive, negative, or neutral in nature.

Degree

A unit of measurement used in various contexts, such as angle measurement in geometry, temperature scaling, or academic achievement.

Hypothesized Mean Difference

The proposed difference between the means of two populations or groups in a statistical hypothesis test.

Conducting T Test

A statistical procedure used for assessing whether the mean values of two separate groups differ significantly.