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

Actual exam question for CIMA's CIMAPRA17-BA4-1 exam
Question #: 62
Topic #: 3
[All CIMAPRA17-BA4-1 Questions]

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?

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Suggested Answer: C

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

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Julie
6 days ago
But what about the contractual duty to B Ltd? Does that matter?
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Dierdre
9 days ago
I'm not sure why M can't recover damages for breach of contract. The accountants were aware of the purpose for which their report would be used, so they should be liable for the consequences.
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Barbra
11 days ago
Option B seems to be the correct answer. The accountants owed a duty of care to the third party, M, who they knew would rely on their report for the purpose of a takeover bid.
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Elsa
13 days ago
I agree with Major, A (Accountants) knew M was relying on their report.
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Major
14 days ago
I think M can sue A (Accountants) in the tort of negligence.
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