Beckler & Associates, CPAs, audited and gave an unqualified opinion on the financial statements of Queen Co. The financial statements contained misstatements that resulted in a material overstatement of Queen’s net worth. Queen provided the audited financial statements to Mac Bank in connection with a loan made by Mac to Queen. Beckler knew that the financial statements would be provided to Mac. Queen defaulted on the loan. Mac sued Beckler to recover for its losses associated with Queen’s default. Which of the following must Mac prove in order to recover?

  1. I. Beckler was negligent in conducting the audit.
  2. II. Mac relied on the financial statements.
    1. a. I only.
    2. b. II only.
    3. c. Both I and II.
    4. d. Neither I nor II.