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| Management of Tyler Company, a nonpublic company, materially misstated the company’s financial statements that were audited by Ted & Ted, CPAs. Ted & Ted was negligent in the performance of the audit and failed to detect the misstatements. In reliance on the audited financial statements, Second Bank extended a loan in the amount of $500,000, and Tyler Company went bankrupt and was unable to repay any of the loan. Assume that Ted & Ted is determined to be 40% responsible for Second Bank’s losses and management of Tyler Company is determined to be 60% liable. Which of the following is not true regarding this situation? A. In a state that has adopted joint and several liability, Ted & Ted may be required to pay the entire $500,000 in damages. B. In a state that has adopted joint liability, Ted & Ted may be required to pay the entire $500,000 in damages. C. In a state that has adopted several liability, Ted & Ted will likely be required to pay the entire $500,000 but would be able to try to recover $300,000 from management. D. In a state that has adopted several liability, Ted & Ted will likely be required to pay only $200,000 in damages. |