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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Maryrose

1 months ago

Option C is clearly wrong. M didn't have to pay for the advice, but he still suffered the consequences of relying on it. The accountants should be held responsible.

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Billi

1 months ago

Haha, I bet the accountants are kicking themselves for giving M that report. They probably thought they were getting a juicy takeover fee, but now they're facing a lawsuit instead!

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Nenita

1 days ago

User 3: M must be furious for overpaying for the shares.

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Cassi

7 days ago

User 2: They should have been more careful with their audit report.

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Ines

10 days ago

I think M might have a case against the accountants for negligence.

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Julieta

11 days ago

M must be really upset about overpaying for B Ltd.

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Reita

15 days ago

Yeah, the accountants should have been more careful with their audit report.

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Tyra

21 days ago

User 1: I can't believe the accountants didn't see this coming.

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Julie

2 months ago

But what about the contractual duty to B Ltd? Does that matter?

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Dierdre

2 months 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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Argelia

1 months ago

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

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Jacklyn

1 months 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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Sherell

1 months ago

B) M 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.

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Brendan

2 months ago

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

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Barbra

2 months 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

3 months ago

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

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Major

3 months ago

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

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