Beckler & Associates CPAs issued an unqualified opinion on the financial statements of Queen Ltd.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 to recover the 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

In order for Mac to recover the losses associated with Queen's default, they must prove both that Beckler was negligent in conducting the audit (I) and that Mac relied on the financial statements (II). Negligence by the auditor is the basis for holding them responsible for damages, and reliance by the client is necessary for the auditor to have a duty of care towards the client.

Beckler & Associates CPAs Issued an Unqualified Opinion on the Financial