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Correct relating to cpa common law liability

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A CPA audited the financial statements of Zing Company. The CPA performed the audit with ordinary negligence and missed extremely material fraud. Wimmer, one of numerous suppliers to Zing, is upset because Wimmer had extended Zing a high credit limit based on the financial statements that were later found to be incorrect. Which of the following statements is the most correct relating to CPA common law liability?

  • Zing will ordinarily attempt to recover using its right of subrogation.
  • Under the Ultramares approach to third party liability, it is extremely doubtful that Wimmer can recover.
  • The CPA firm will need to convince a jury that it performed the audit with scienter to avoid liability.
  • Wimmer will be required to show that it exercised due diligence in making its credit granting decision, after which the CPA would be required to prove good faith on its audit.

Reference no: EM133233721

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