A CPA Has Been Hired to Audit a Bank That

question 9

Multiple Choice

A CPA has been hired to audit a bank that is regulated by the federal banking authorities.This audit will be submitted by the bank to numerous readers,including federal regulators.The CPA's audit agreement with the bank provides that the bank will "reimburse and indemnify it for all losses it incurs if the bank's financial statements were prepared by the bank in a manner that was misleading or fraudulent." This provision:

• A) Definitely is a violation of the Acts Discreditable Rule
• B) Definitely is not a violation of the Acts Discreditable Rule because it provides for a limitation on the CPA's liability only in cases where the client solely is at fault
• C) Definitely is not a violation of the Acts Discreditable Rule because the CPA firm's agreement is reasonable and appropriate
• D) Potentially is a violation of the Acts Discreditable Rule

---

Definitions:

Constant

A value that does not change and remains the same in mathematical equations, experiments, and various scientific contexts.

Regression

A statistical technique employed to identify the intensity and nature of the connection between a single dependent variable and one or more independent variables.

Scatterplot

A graphical representation that displays the relationship between two quantitative variables by using dots.

Correlation

A statistical measure that describes the extent to which two variables change together, indicating the strength and direction of their relationship.