Beckler & Associates,CPAs,audited and gave an unqualified opinion on the financial statements of Queen Co.The financial statements contained misstatements that resulted in a material overstatement of Queen's net worth.Queen provided the audited financial statements to Mac Bank in connection with a loan made by Mac to Queen.Beckler knew that the financial statements would be provided to Mac.Queen defaulted on the loan.Mac sued Beckler for ordinary negligence to recover for its losses associated with Queen's default.Which of the following must Mac prove in order to recover?
I.Beckler was negligent in conducting the audit.
II.Mac relied on the financial statements.

Question

Quizplus · Accepted Answer

Mac must prove both that Beckler was negligent in conducting the audit and that Mac relied on the financial statements. Negligence by Beckler is necessary because Mac is seeking recovery for ordinary negligence. Mac's reliance on the financial statements is necessary because it is an element of the causation requirement for negligence.

Beckler & Associates,CPAs,audited and Gave an Unqualified Opinion on the Financial