1.- gulf resources & chemical corporation retained peat marwick to audit its financial statements. the completed auditor report as included in gulf annual report, which became publicly avalaible the following february. one year before the date, d/ s kennedy & company had reported to the sec that it had acquired over 2 million shares of gulf common stock and that it intended to acquire a controlling interest in gulf. peak amrwick was aware of this sec filing. in fact gulf management discuss with peat marwick the potential for purchasing lennedys shares. thus peat marwick was aware of kennedys interest in acquiring a controlling interest in gulf and that gulf intended to reat kennedy as a hostile takeover.. in march , kennedy with a copy of its annual report. thereafter, kennedy purchased almost 4 million shares of gulf and gained operating control of the corporation. peat marwick first learned of this transaction a few days prior to the july closing gulf filed for bankruptcy protection two years later, rendering kennedys investments worthless. kennedus then filed a civil complaint against peat marwick as a result of its alleged reliance on the auditors report. kennedy claimed the report materially misrepresented the financial condition of gulf. Did peat marwick owe a legal duty to kennedy? explain

2.- Becon associates had a substancial portion of its assets(73 percent ) invested with bernard madoff empire funds invested tends of millions of dollars in beacon. throughout this time period. friedberg, smith & co, an accounting firm, was responsible for performing annual audits of beacon's financial statements and each year would issues its auditors report of beacons. the reports represented that the audit included an examination of evidence supporting the amounts and disclosures in the financial statements, assessed the accounting principles used and estimates made by management and evaluated the overall financial statement of beacon presendted fairly the financial position and the results of beacons operations and changes in net assets in conformity with generally accepted accounting principles. none of friedberg, smiths 's audit reports disclosed any concerns regarding the reported value of the empire funds' capital accounts with beacon. after madoff's ponzi scheme became public, it was discovered that more than 330 million in assets that madoffs claimed to have purchased with beacon funds did not exist. empire funds sued the accounting firm , arguing that the accounting firm's negligiences in auditing beacon;s fianncial statements caused empire funds to suffer losses when it relied on those audit reports to decide whether to invest in beacon, specifically, empire funds assets that friedberg, smiths audits failed to give any indication that the assets invested with maddoff might b nonexistent or that the reported value of those investments could inacurate or fictitious. should the auditor be found liable for empire funds losses under the near privity approach? explain

3.- stephenson invested 60 millione in greenwich sentry, a limited partnership operating as a "feeder fund" into bernard l madoff investment securities llc, which was later revealed to be a ponzi sheme. for 3 years , pricewaterhousecoopers (PwC) was greenwich sentry's auditor and issued greenwich sentry unqualified audit reports attesting to the accuracy of greenwich's financial statements. after learning of the madoff ponzi shceme, stephenson attempted to withdraw the entirely of his greenwich sentry investment, but it was gone. Alleging that PWC had failed to comply with generally accepted audting standerds in conducting its audits of greenwich security. Stephenson filed a lawsuit against Pwc for fraud. Should the court dismiss the fraud claim against Pwc? Explain