Credit Alliance Corporation v. Arthur Andersen & Co.

Facts: Arthur Andersen & Co., CPAs, prepared audited financial statements of L.B. Smith, Inc., for the years 1977 to 1979. An unqualified opinion was given for all years. These financial statements were prepared negligently, and failed to discover the precarious financial position of Smith. Without Andersens knowledge, Smith gave these financial statements to Credit Alliance Corporation, which loaned Smith over $15 million, relying on these financial statements. In 1980, Smith went into bankruptcy. Credit Alliance sued Andersen for negligence. The trial court denied Andersens motion to dismiss and the Appellate Division affirmed. Andersen appeals.

Question: Is Andersen liable to unknown, unintended users of financial statements it prepared for negligence?