FMC Electronics Ltd engaged the accounting firm of Crosby, Seals & Anderson to perform its annual audit. The firm performed the audit in a competent, non-negligent manner and billed FMC for $16 000, the agreed fee. Shortly after delivery of the audited financial report, Robert Hightower, the assistant controller, disappeared, taking with him $28 000 of FMC's funds. It was then discovered that Hightower had been engaged in a highly sophisticated, novel defalcation scheme during the past year. He had previously embezzled $35 000 of FMC's funds. FMC has refused to pay the auditor's fee and is seeking to recover the $63 000 that was stolen by Hightower.