Lauren hires Humphrey, a CPA, to audit her financial statements. The engagement letter includes a statement acknowledging that a

Question

2 years ago

6

Lauren hires Humphrey, a CPA, to audit her financial statements. The engagement letter includes a statement acknowledging that a

udited financial statements are needed for a filing with a regulatory body. Humphrey completes the audit and issues an unqualified opinion. Based on the audited financial statements, Key Largo Bank approves a loan to Lauren. Four months later, Lauren files for bankruptcy. Key Largo Bank would most likely sue Humphrey claiming:

Business

1 answer:

uysha [10] · Answer 1 · 2022-06-06T08:59:46+03:00

Answer:

it was a foreseen party

Explanation:

Key Largo bank would most likely sue Humphrey on the ground that it was a foreseen party. This is because Humphrey(CPA) being an auditor, knew that the audited financial statements are required for a filing with the regulatory body. Moreover, the auditing firm- Humphrey knew about the specific purpose of the audit report including the fact that his or her opinion(report) will will relied upon by other parties hence a foreseen third party for the auditor.

Based on the aforementioned, Key Largo Bank can sue Humphrey because he is aware of the intended purpose of the audit report.