Part 6 Auditor Legal Defense and Types of Third Parties (16 points)

1. As discussed in class, discuss the auditors defense for Lack of Duty if a third party sues the auditor.

2. Identify types of third parties.

In class we noted that there are different types of third parties. Classify the independent situations shown below as either (a) Primary beneficiary (Identified User; Near Privity);

2. Foreseen; or (c) Foreseeable (reasonably foreseeable).
   1. A potential purchaser of a business who asks for audited financial statements of that business and is known to the auditor.

2. A potential purchaser of a business who asks for audited financial statements of that business and is NOT known to the auditor. However, the auditor knows that his or her client has asked for an audit because of an intention to sell the business.

3. The company borrowed money from Bank ABC. The auditor had been led to believe that the client would use the financial statements only to facilitate sale of the company. Bank ABC is what type of third party?
4. A vendor who sold inventory to a company.

Answers: Type of third Party

Use letters!

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