Fact Pattern 14-A3 (Questions A16-A17 Apply)

question 20

Multiple Choice

Fact Pattern 14-A3 (Questions A16-A17 apply)
Flip,an accountant,certifies an audit for Erstwhile Corporation,Flip's client,knowing that Erstwhile will use the audit to obtain a loan from Deepwater Bank.Flip believes that the audit is true and does not intend to deceive the bank,but does not check the audit before certifying it.
-Refer to Fact Pattern 14-A3.Under these circumstances,Deepwater's best course of action is most likely to

• A)exert economic duress on Flip to retire from accounting.
• B)rescind the loan on the ground of unconscionability.
• C)recover damages from Flip for any loss on the loan.
• D)undercut Flip's career with negative puffery.

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Definitions:

Equipment Sale

The process of selling off business-owned equipment, either to upgrade to newer assets or to liquidate assets for cash.

Cash Dividend

A payment made by a company out of its earnings to its shareholders in cash.

Financing Activities

Transactions that involve raising funds to finance the company's operations and repaying debt; part of a firm's financial operations detailed on the statement of cash flows.

Principal Repayment

The portion of a loan payment that goes toward reducing the original amount borrowed, not including interest.