While Conducting an Audit,Larson Associates,CPAs,failed to Detect Material Misstatements Included

question 6

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 suit by a purchaser against Larson for common-law fraud,Larson's best defense would be that

• A) larson did not have actual or constructive knowledge of the misstatements and the auditor followed PCAOB Auditing Standards in the audit.
• B) larson's client knew or should have known of the misstatements.
• C) larson did not have actual knowledge that the purchaser was an intended beneficiary of the audit.
• D) larson was not in privity of contract with its client.

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