In order to expand its operations, Barton Corp. raised $5 million in a public offering of common stock, and also negotiated a $2 million loan from First National Bank. In connection with this financing, Barton engaged Hanover & Co., CPAs to audit Barton's financial statements. Hanover knew that the sole purpose of the audit was so that Barton would have audited financial statements to provide to First National Bank and the purchasers of the common stock. Although Hanover conducted the audit in conformity with its audit program, Hanover failed to detect material acts of embezzlement committed by Barton Corp.'s president. Hanover did not detect the embezzlement because of its inadvertent failure to exercise due care in designing the audit program for this engagement.
After completing the engagement, Hanover issued an unqualified opinion on Barton's financial statements. The financial statements were relied upon by the purchasers of the common stock in deciding to purchase the shares. In addition, First National Bank approved the loan to Barton based on the audited financial statements. Within sixty days after the sale of the common stock and the issuance of the loan, Barton was involuntarily petitioned into bankruptcy. Because of the president's embezzlement, Barton became insolvent and defaulted on the loan from the bank. Its common stock became virtually worthless. Actions have been brought against Hanover by:
• The purchasers of the common stock who have asserted that Hanover is liable for damages under Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.
• First National Bank, based upon Hanover's negligence.
• Trade creditors who extended credit to Barton, based upon Hanover's negligence.

Required
a. Discuss whether you believe Hanover will be found liable to the purchasers of common stock.
b. Indicate whether you believe First National Bank will be successful in its claim against Hanover.
c. Indicate whether you believe the trade creditors will be successful in their claim against Hanover.*