The Ultramares case established the initial precedent that auditors' liability for ordinary negligence is limited to those who are in privity of contract.

Question

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The statement is true. The Ultramares case (Ultramares Corporation v. Touche) in 1931 limited auditors' liability for ordinary negligence to those who are in privity of contract. This means that auditors can only be held liable to their clients and not to third-party users who rely on their audit report.

The Ultramares Case Established the Initial Precedent That Auditors' Liability