Answer Happy

5-14 (Objectives 5-40,5-5) The following questions concern CPA firms' liability under common law. Choose the best response. a. In a common law action against an accountant, lack of privity is a viable defense if the plaintiff 1. is the client's creditor who sues the accountant for negligence. 2. can prove the presence of gross negligence that amounts to a reckless disregard for the truth. 3. is the accountant's client. 4. bases the action upon fraud. b. The 1136 Tenants case was important chiefly because of its emphasis on the legal liability of the CPA when associated with 1. an SEC engagement 2. an audit resulting in a disclaimer of opinion. 3. letters for underwriters. 4. unaudited financial statements. c. If a CPA recklessly departs from the standards of due care when conducting an audit, the CPA will be liable to third parties who are unknown to the CPA based on 1. negligence 2. gross negligence. 3. strict liability 4. criminal deceit. 0