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

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Definitions:

Designer Label

A brand name associated with high fashion, quality, and prestige, often created by a renowned fashion designer.

Stand-alone Stores

Retail outlets located independently rather than within a mall or shopping center, often offering a specific brand or product range.

Specialty Goods

Specialty goods are high-value, often luxury items that are purchased infrequently and for which consumers are willing to invest significant time and effort in the buying process.

Convenience Goods

Consumer items that are widely available and can be bought frequently and with minimal effort, such as everyday household items.