The Most Restrictive View Under Common Law Is That Auditors

question 1

Essay

The most restrictive view under common law is that auditors have no liability to third parties who do not have a privity relationship with the auditor. Briefly define privity and the effect it has on the auditor, client, investors, and creditors under common law.

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Definitions:

Capital

Wealth in the form of money or other assets owned or employed in business by an individual, firm, or country.

Wages and Income

Represents the earnings received by laborers for their work and can include salaries, wages, and other forms of compensation.

Circular-Flow Diagram

A visual model that shows how goods, services, and money move through the economy in a continuous, circular flow between households and firms.

Money

A medium of exchange used to facilitate transactions for goods and services.