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

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Definitions:

Major Structure

The most stable or predominant arrangement of atoms in a molecule or the most significant resonance form of a compound when multiple structures are possible.

N-butanol

A four-carbon linear alcohol with the formula C4H9OH, used as a solvent and in the synthesis of various organic compounds.

Hydrochloric Acid

A strong, corrosive acid consisting of hydrogen and chlorine (HCl), widely used in industry and research for various applications, including metal cleaning and pH adjustment.

Lucas Reagent

A chemical reagent used to classify alcohols of low molecular weight based on their reactivity, comprising zinc chloride in concentrated hydrochloric acid.