An Accounting Firm Was Sued for Negligently Preparing a Financial

Multiple Choice

An accounting firm was sued for negligently preparing a financial report for a company. It causes losses to occur. At trial, the firm was found to have been negligent in its work. This meant that the firm would likely be:

A) responsible for losses suffered by its client that could be linked to reliance on the work
B) responsible for losses suffered by its client that could be linked to reliance on that work and to the firm whose books were audited since that firm's reputation was damaged
C) responsible for losses not to exceed $1 million, the statutory limit on accountant liability in that state
D) not responsible for damages despite negligence, since reliance could not be shown
E) not responsible for damages despite negligence because of a lack of proximate cause