While Conducting an Audit,Larson & Larson Chartered Professional Accountants Failed

question 17

Multiple Choice

While conducting an audit,Larson & Larson Chartered Professional Accountants failed to detect a material misstatement in its client's financial statements.Larson's unqualified opinion was included with the financial statements in a 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.Which of the following statements is correct with regard to a suit against Larson and the client by a purchaser of the securities?

• A)The purchaser must prove that Larson was grossly negligent in conducting the audit.
• B)The purchaser must prove that Larson knew of the material misstatements.
• C)Larson will not be liable if it was reasonable for an auditor to conclude that the financial statements were accurate.
• D)Larson will be liable unless the purchaser did not rely on the financial statements.

---

Definitions:

Confidence Interval

A spectrum of values calculated from statistcal samples which is expected to cover the value of a not yet known population trait.

Non-Normal Population

A population that does not follow a normal distribution, characterized by skewness, kurtosis, or other non-normal traits.

Bootstrap Procedure

A resampling method used to estimate the distribution of a statistic by repeatedly sampling with replacement from the data set.

Observations

In statistics and research, these are the collected data points or instances from which insights and conclusions are drawn.