An Audit Client Loses a Lawsuit and the Judgment Is

An audit client loses a lawsuit and the judgment is for an amount in excess of the contingent liability the client had recorded in the audited financial statements. The auditor, using the typical degree of due care as other members of the profession, determined that the amount of contingent liability recorded by the client in the financial statements for the pending lawsuit was reasonable, given the facts at the time of the audit. This judgment by the auditor is likely to result in:

A) sanctions by the PCAOB levied against the individual auditor as well as the accounting firm.
B) a successful lawsuit claiming auditor negligence.
C) a successful lawsuit claiming breach of contract.
D) no legal action whatsoever since due care was exercised.

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