Chapter 4 The auditor\'s legal environment If a CPA firm is being sued for commo

Question

Chapter 4 The auditor's legal environment If a CPA firm is being sued for common-law fraud by a client and a third party based upon materially false financial statements, which of the following defenses is generally not available to the auditor? 13. a. Contributory negligence on the part of the third party and non-negligent performance. b. Lack of duty and none-proximate cause. c. Contributory negligence on the part of the client and non-negligent performance d. Lack of privity of contract and absence of causal connection. Which of the following legal cases provides a lesson to the auditors that the potential consequences of them knowingly committing a wrongful act are so severe that is it is unlikely that the potential benefits could ever justify the actions? 14. a. ESM Government Securities case (1986). b. Cenco Incorporated V. Seidman &Seidman; (1982). c. Ernst & Enst V. Hochfelder (1976) d. Continental Vending Machine case (1969).

Explanation / Answer

13.(d) Lack of privity of contract and absence of casual connection.

14. (b) Cenco Incorporated V. Seidman & seidman (1982)

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