Which of the Following Is a Correct Statement Related to CPA

question 26

Multiple Choice

Which of the following is a correct statement related to CPA legal liability under common law?

• A)CPAs are normally liable to their clients,the shareholders,for either ordinary or gross negligence.
• B)CPAs are liable for either ordinary or gross negligence to identified third parties for whose benefit the audit was performed.
• C)CPAs may escape all personal liability through incorporation as a limited liability corporation.
• D)CPAs are guilty until they prove that they performed the audit with "good faith."

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Definitions:

Price Floor

A minimum legal price below which a product cannot be sold; to have an impact, a price floor must be set above the equilibrium price.

Surplus

A situation where the quantity of a good or service supplied exceeds the quantity demanded at the current price.

Substitution Effect

The economic concept that as prices rise (or incomes decrease), consumers will replace more expensive items with cheaper alternatives, holding utility constant.

Relative Price

Relative price is the price of one good or service compared to another, essentially indicating the trade-off between choosing one over the other.