While Conducting an Audit,Larson Associates CPAs Failed to Detect a Material

question 47

Multiple Choice

While conducting an audit,Larson Associates CPAs failed to detect a material misstatement in its client's financial statements.Larson's unqualified opinion was included with the financial statements in a registration statement and prospectus for a public offering of securities made by the client.Larson knew that its opinion and the financial statements would be used for this purpose.In a suit by a purchaser against Larson for common law negligence,Larson's best defence would be that the ________.

• A)audit was conducted in accordance with generally accepted auditing standards
• B)client was aware of the misstatements
• C)purchaser was not in privity of contract with Larson
• D)identity of the purchaser was not known to Larson at the time of the audit

---

Definitions:

Supplies

Materials or items used in the operation of a business or needed to provide services.

Unsought Product

Products that consumers do not actively seek out to buy, and may purchase only out of necessity or unforeseen need, such as emergency services or life insurance.

Shopping Products

Goods for which consumers will spend time and effort to compare quality, price, and perhaps style between different sellers before making a purchase.

Impulse Purchases

Unplanned buying decisions made by consumers on the spot, often triggered by emotions or the strategic placement of products.