CIMA Exam CIMAPRA17-BA4-1 Topic 3 Question 62 Discussion

Actual exam question for CIMA's CIMAPRA17-BA4-1 exam

Question #: 62
Topic #: 3

M wrote to A (Accountants), asking if he could rely on the firm's audit report of B Ltd. M told A (Accountants), confidentially, that he was considering making a take-over bid for B Ltd. A (Accountants) advised M that he could rely on the report. As a result, M relied on the report and purchased the entire share capital of B Ltd. M has now discovered that he has paid considerably more for the shares than they were worth, as the company's stock had been negligently over-valued in the audit report.

Which of the following is correct?

AM cannot recover compensation from A (Accountants) in tort, as they only owe a contractual duty to B Ltd.

BM can sue A (Accountants) in the tort of negligence as they knew that M intended to rely on their report and the purpose for which he intended to use it.

CM cannot hold A (Accountants) responsible, as he did not pay for their advice.

DM can recover damages from A (Accountants) for breach of contract.

Show Suggested Answer

Suggested Answer: C

by Devorah at Dec 06, 2022, 04:02 PM

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Elsa

1 days ago

I agree with Major, A (Accountants) knew M was relying on their report.

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Major

2 days ago

I think M can sue A (Accountants) in the tort of negligence.

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