Hark,CPA,negligently failed to follow generally accepted auditing standards in auditing Long Corporation's financial statements.Long's president told Hark that the audited financial statements would be submitted to several,at this point undetermined,banks to obtain financing.Relying on the statements,Third Bank gave Long a loan.Long defaulted on the loan.In jurisdiction applying the Ultramares decision,if Third sues Hark,Hark will:

Question

Quizplus · Accepted Answer

In jurisdictions applying the Ultramares decision, a CPA can only be held liable to third parties who were in privity of contract or who were known users of the financial statements at the time of the audit. As Third Bank was an unknown user of the financial statements, there was no privity of contract between Hark and Third, and therefore Hark would win the case.

Hark,CPA,negligently Failed to Follow Generally Accepted Auditing Standards in Auditing