As a Consequence of His Failure to Adhere to Generally

question 53

Multiple Choice

As a consequence of his failure to adhere to generally accepted auditing standards in the course of his examination of the Lamp Corp., Harrison, CPA, did not detect the embezzlement of a material amount of funds by the company's controller. As a matter of common law, to what extent would Harrison be liable to the Lamp Corp. for losses attributable to the theft?

• A) He would have no liability, since the ordinary examination cannot be relied upon to detect thefts of assets by employees.
• B) He would have no liability because privity of contract is lacking.
• C) He would be liable for losses attributable to his negligence.
• D) He would be liable only if it could be proven that he was grossly negligent.

---

Definitions:

Perceptual Process

The sequence of steps that includes receiving, selecting, organizing, and interpreting sensory information.

Interpretation

The act or process of explaining the meaning of something, often involves understanding the significance of words, actions, or events.

Causal Attributions

The process of trying to determine the causes of specific events, especially regarding understanding behaviors and outcomes in social settings.

Task Difficulty

The perceived level of challenge presented by a task, which can influence motivation and performance.