Bailey CPA,audited Lincoln Corporation.The shareholders sued both Lincoln and Bailey for securities fraud under the Federal Securities Exchange Act of 1934.The court determined that there was securities fraud and that Lincoln was 80% at fault and Bailey was 20% at fault due to her negligence in the audit.Both Lincoln and Bailey are solvent and the damages were determined to be $2 million.What is the maximum liability of Bailey?

Question

Quizplus · Accepted Answer

Bailey's maximum liability would be 20% of the damages, which is $400,000 ($2 million x 20%). Therefore, the correct answer is B. Option A is incorrect because Bailey was found to be partially at fault. Option C is incorrect because Bailey's liability is only 20% of the total damages. Option D is incorrect because the damages were determined to be $2 million, and Bailey's liability is limited to only 20% of that amount.