Marquis Company's Liabilities Exceed Its Assets,but the Firm's Employees Falsify

question 56

Multiple Choice

Marquis Company's liabilities exceed its assets,but the firm's employees falsify its books to reflect a positive net worth.Marquis hires Nan & Ollie,an accounting firm,to prepare a balance sheet,which is certified to show a positive net worth.Pure Credit Corporation relies on the balance sheet to make a loan to Marquis.When the firm defaults,Pure Credit files a suit against Nan & Ollie.Under the Ultramares rule,the accounting firm is most likely

• A)liable because Nan & Ollie owed a duty of care to all third parties.
• B)liable because Nan & Ollie owed a duty of care to Marquis.
• C)liable because Nan & Ollie owed a duty to any foreseeable user.
• D)not liable because Nan & Ollie and Pure Credit were not in privity.

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Definitions:

Investment Equipment

Assets purchased for long-term use in the production of goods or services, typically including machinery and other manufacturing tools.

Project Profitability Index

A financial metric used to evaluate the desirability of an investment or project, calculated by dividing the present value of future cash flows by the initial investment cost.

Internal Rate Of Return

The discount rate at which the net present value of an investment project is zero; the rate of return of a project over its useful life.

Preference Ranking

A system or method used to arrange or prioritize options based on their desirability or value from a subjective viewpoint.