Kerry CPA is the auditor for Sammy Corp.During the audit,Kerry discovers a material misstatement in Sammy's financial statements.Sammy's management tells Kerry that if the misstatement is corrected or if Kerry issues an opinion that indicates there is a material misstatement,Sammy Corp.will likely have to declare bankruptcy and thousands of employees will lose their jobs.Which of the following statements is true if the misstatement is not corrected and Kerry issues an unqualified opinion on Sammy's financial statements?
A)Kerry is liable only to third parties in privity of contract.
B)Kerry is liable only to known users of the financial statements.
C)Kerry is likely liable to any person who suffered a loss as a result of the fraud.
D)Kerry is likely liable to third parties even if the third parties were aware of the fraud and did not rely on the opinion.

Question

Quizplus · Accepted Answer

Kerry is likely liable to any person who suffered a loss as a result of the fraud because issuing an unqualified opinion despite knowing about a material misstatement constitutes negligence or fraud, making Kerry liable to those harmed by relying on the misstated financial statements.

Kerry CPA Is the Auditor for Sammy Corp