The "Continental Vending Machine" Court Decision Was a Landmark Ruling

question 16

Multiple Choice

The "Continental Vending Machine" court decision was a landmark ruling because:

• A) It authorized CPA firms to both prepare a client's financial statements and then audit these same financial statements
• B) It held that, for consistency, all financial statements must comply with GAAP, regardless of the industry in which a company operates
• C) Auditors can be held liable for misconduct, even if financial statements comply with GAAP
• D) Auditors may recoup from an audit client all of the litigation losses that the auditor sustains from certifying misleading financial statements if the audit client solely was responsible for the statement presentation being misleading

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Definitions:

Pure Competition

A market structure characterized by an extremely large number of sellers and buyers, homogeneous products, and the ease of entering and exiting the market.

Electric Utility

Businesses involved in the production, conveyance, and distribution of electric power to end users and commercial entities.

Gas Utility

Companies that provide natural gas services to residential, commercial, and industrial customers.

Market Structure

The competitive environment characterizing a market, determined by the number of firms, product differentiation, and ease of entry and exit.