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:

AVC (Average Variable Cost)

The total variable costs (costs that vary with the level of output) divided by the quantity of output produced, representing the variable cost per unit.

MC (Marginal Cost)

The rise in overall expenses associated with the production of an extra unit of a product or service.

Break-Even Point

The level of production or sales at which total revenues equal total costs, resulting in no profit or loss.

Shutdown Point

The shutdown point is the level of output and price at which a business covers its variable costs; operating below this point would lead the firm to losses greater than its fixed costs.