Fact Pattern 14-A3 (Questions A16-A17 Apply)

question 20

Multiple Choice

Fact Pattern 14-A3 (Questions A16-A17 apply)
Flip,an accountant,certifies an audit for Erstwhile Corporation,Flip's client,knowing that Erstwhile will use the audit to obtain a loan from Deepwater Bank.Flip believes that the audit is true and does not intend to deceive the bank,but does not check the audit before certifying it.
-Refer to Fact Pattern 14-A3.Under these circumstances,Deepwater's best course of action is most likely to

• A)exert economic duress on Flip to retire from accounting.
• B)rescind the loan on the ground of unconscionability.
• C)recover damages from Flip for any loss on the loan.
• D)undercut Flip's career with negative puffery.

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Definitions:

Budgeted Fixed Overhead Cost

Budgeted fixed overhead cost is the projected amount of fixed costs that are expected to be incurred during a specific period, used for budgeting purposes.

Material Quantity Variance

The difference between the actual quantity of material used in production and the standard quantity expected to be used.

Direct Materials Purchased

The raw materials bought by a company that are directly used in the production of its goods.

Actual Variable Manuf. Overhead

The real costs incurred from indirect, variable production expenses, assessed after the production process is completed.