The Restatement Approach to Third-Party Negligence Suits Against Accountants

question 14

Multiple Choice

The Restatement approach to third-party negligence suits against accountants:

• A) does not require that the accountant be aware of the third parties.
• B) holds that the accountant is liable only to those third parties who are unreasonably foreseeable.
• C) does not protect the typical investor who was unknown to the accountant and his or her client when the financial statements were prepared.
• D) requires that the accountant be unaware of the third parties' reliance on the financial statements.

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Definitions:

Unlevered Cost

The cost of an investment that does not include the effects of borrowing or leverage.

Annual Coupon

The annual interest payment made to bondholders, calculated as a percentage of the bond's face value.

Unlevered Cost

refers to the cost of an investment or project that does not include the effect of financial leverage, showing its risk and return profile without debt.

Tax Rate

The portion of one’s earnings or a company's profits that is required to be paid to the government as tax.