Hark, CPA, failed to follow generally accepted auditing standards in auditing Long Corp.'s financial statements. Long's management had told Hark that the audited statements would be submitted to several banks to obtain financing. Relying on the statements, Third Bank gave Long a loan. Long defaulted on the loan. In a jurisdiction applying the Ultramares doctrine, if Third sues Hark, Hark will

Question

Quizplus · Accepted Answer

The Ultramares doctrine, followed in some jurisdictions, limits an auditor's liability to third parties to those with whom the auditor has privity of contract or a relationship sufficiently close to the contracting parties to justify expanding the duty of care. In this case, Hark only had a contractual relationship with Long Corp. Therefore, Hark cannot be held liable to Third Bank under the Ultramares doctrine.

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