Assume That a CPA Firm Was Negligent But Not Grossly

question 32

Multiple Choice

Assume that a CPA firm was negligent but not grossly negligent in the performance of an engagement.Which of the following plaintiffs probably would not recover losses proximately caused by the auditors' negligence?

• A)A loss sustained by a client in a suit brought under common law.
• B)A loss sustained by a lender not in privity of contract in a suit brought in a state court which adheres to the Ultramares v.Touche precedent.
• C)A loss sustained by initial purchasers of stock in a suit brought under the Securities Act of 1933.
• D)A loss sustained by a bank named as a third-party beneficiary in the engagement letter in a suit brought under common law.

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Definitions:

Maintenance Activities

Actions undertaken to keep machinery, equipment, or systems operating smoothly and prevent breakdowns.

Manager

An individual responsible for controlling or administering an organization or group of staff, focusing on planning, executing strategies, and overseeing operations.

Work Team's Performance

The measure of efficiency and effectiveness with which a group of individuals achieves its collective goals and objectives.

Cohesiveness

The degree to which members are attracted to and motivated to remain part of a team.