Auditors may be held liable to both their clients and third parties under common law.a. What must a client prove to recover its losses from the auditors under common law? b. In a court that adheres to the precedent set by the Ultramares v. Touche case, what must an ordinary third party prove to recover losses from the auditors under common law?
What will be an ideal response?
a. To recover losses under common law, a client must prove:Losses,
Reliance on the auditors' representations,
That reliance was proximate cause of the losses, and
Negligence on the part of the auditors.
b. To recover losses under common law, ordinary third parties must prove:Losses,
Reliance on the auditors' report,
That reliance was proximate cause of the losses, and
Gross negligence on the part of the auditors.
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Which of the following is true of job analysis?
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The ending merchandise inventory for the current accounting period is overstated by $3,500. What will be the effect of this error?
A) The net income for the current accounting period will be overstated by $3,500. B) The cost of goods sold for the current accounting period will be overstated by $3,500. C) The ending merchandise inventory for the next accounting period will be overstated by $3,500. D) The cost of goods sold for the next accounting period will be understated by $3,500.
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Answer the following statement true (T) or false (F)