The "Continental Vending Machine" Court Decision Was a Landmark Ruling

question 16

Multiple Choice

The "Continental Vending Machine" court decision was a landmark ruling because:

• A) It authorized CPA firms to both prepare a client's financial statements and then audit these same financial statements
• B) It held that, for consistency, all financial statements must comply with GAAP, regardless of the industry in which a company operates
• C) Auditors can be held liable for misconduct, even if financial statements comply with GAAP
• D) Auditors may recoup from an audit client all of the litigation losses that the auditor sustains from certifying misleading financial statements if the audit client solely was responsible for the statement presentation being misleading

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Definitions:

Forbearance

A temporary postponement of mortgage payments granted by a lender or creditor in lieu of forcing the property into foreclosure, allowing the borrower time to catch up on payments.

Breach of Contract

A violation of the terms or conditions as stated in a contract, which may result in legal action or penalties against the party at fault.

Fair Market Value

The price at which property would sell for on the open market between a willing buyer and a willing seller, both having reasonable knowledge of the relevant facts.

Valid Consideration

An essential element in the formation of a contract, referring to something of value (such as goods, services, or money) exchanged by the parties that induces them to enter into the agreement.