Bugle Corp.approved a plan of merger with Stanley Corp.One of the determining factors in approving the merger was the strong financial statements of Stanley which were audited by Dennis & Co. ,CPAs.Bugle had engaged Dennis to audit Stanley's financial statements.While performing the audit,Dennis failed to discover certain instances of fraud which have subsequently caused Bugle to suffer substantial losses.In order for Dennis to be liable under common law,Bugle,at a minimum,must prove that Dennis:

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In order for Dennis to be liable under common law, Bugle must prove that Dennis failed to exercise due care. This means that Dennis did not carry out their duties with the level of competence that a reasonable auditor would have exercised in similar circumstances. Bugle does not need to prove that Dennis acted recklessly or knew of the instances of fraud, only that they did not exercise due care as auditors. Gross negligence may also be a factor in determining liability, but it is not the minimum requirement for establishing liability.