Question

Berry Corporation hires the Unitas CPA firm to perform an audit. Which of the following provisions in their engagement contract would not be problematic?

A provision in which Unitas agreed to indemnify Berry for losses resulting from the acts of Berry's own employees.

A provision in which Berry Corporation agrees to indemnify Unitas for any losses it sustains in litigation caused by knowing misrepresentations made by Berry Corporation agents.

A provision in which Berry Corporation agrees to indemnify Unitas for any losses it sustains in litigation caused by its own intentional errors in performing

the audit.

A provision in which Berry Corporation agrees to indemnify Unitas for any losses it sustains in litigation caused by its careless errors in performing the audit.

Answer 1

Ans. Option B is correct.

A provision in which Berry Corporation agrees to indemnify Unitas for any losses it sustains in litigation caused by knowing misrepresentations made by Berry Corporation agents.

Reason : This provision would not be problematic in the engagement contract because berry corporation would be indemnifying for there own misrepresentations to CPA firm. Where as in option C & D would be problematic because due to error of CPA firm, why should berry corporation indemnify the CPA firm. Option A is also incorrect because for mistake of employees of berry corporation, why should CPA firm indemnify berry corporation. So, option B is correct based on above discussion.