Krims representaion was untrue because of material change, Ask an Expert

Accounting

Krim, president and CEO of United Co., engaged Smith CPA to audit United financial statements so that United could secure a loan from First Bank. Smith issued an unqualified opinion on May 20, but the loan delayed. On Aug 5 on inquiry to Smith by First Bank, Smith relying on Krims representation, made assurance that here was no material change to united financial status. Krims representaion was untrue because of material change which took place May 20. First ralied on Smiths assurance of no change. Shortly thereafter, United became insolvent. If First sues Smith for negligent misrepresentaion, Smith will be found

A) not liable, because Krim misled Smith, and a CPA is not responsable for a clients untrue representation

B) liable, becuase Smith should have undertaken suffiecent auditing procedures to verify the status of United

C) not liable, because Smith opinion only covers the period up to May 20

D)Liable,because Smith should have contracted the chief financial officer rather than the chief executive officer

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M990712

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