CPA · Question 08 · Area I: Ethics & Tax Procedures
A CPA firm negligently prepared a financial statement for a client. The firm knew the client intended to use the statement to obtain a loan from Bank A. However, the client actually used the statement to obtain a loan from Bank B. Bank B relied on the statement and suffered a loss. In a jurisdiction that follows the 'Ultramares' doctrine, is the CPA firm liable to Bank B?
Answer options:
Yes, because the negligence caused the loss.
Yes, because Bank B is a foreseen third party.
No, because Bank B was contributory negligent.
No, because there was no privity of contract between the CPA firm and Bank B.
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