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 establishes that a third party may only recover damages from a CPA for negligent misrepresentation if there is privity of contract or a relationship so close that the parties can be considered as though in privity. In this case, Hark did not have a relationship with Third Bank, so there was no privity of contract between them. Therefore, Hark cannot be held liable for any damages incurred by Third Bank.

Hark,CPA,failed to Follow Generally Accepted Auditing Standards in Auditing Long