Watts and Williams, a firm of PAs, audited the accounts of Sampson Skins, Inc., a corporation that

Question:

Watts and Williams, a firm of PAs, audited the accounts of Sampson Skins, Inc., a that imports and deals in fine furs. Upon completion of the audit, the auditors supplied Sampson Skins with 20 copies of the audited financial statements. The firm knew in a general way that Sampson Skins wanted that number of copies of the auditor’s report in order to furnish them to banks and other potential lenders.
The in question was misstated by approximately $800,000. Instead of having a $600,000 net worth, the was insolvent. The management of Sampson Skins had doctored the books to avoid bankruptcy. The assets had been overstated by $500,000 of fictitious and non- existent and $300,000 of nonexistent skins listed as inventory when, in fact, Sampson Skins had only empty boxes. The audit failed to detect these fraudulent entries. Martinson, relying on the audited financial statements, loaned Sampson Skins $200,000. He is now seeking to recover his loss from Watts and Williams.
REQUIRED
State whether each of the following is true or false, and give your reasons:
a. If Martinson alleges and proves negligence on the part of Watts and Williams, he will be able to recover his loss.
b. If Martinson alleges and proves constructive fraud (i.e., gross negligence on the part of Watts and Williams), he will be able to recover his loss.
c. Martinson does not have a contract with Watts and Williams.
d. Unless actual fraud on the part of Watts and Williams can be shown, Martinson cannot recover his loan.
e. Martinson is a third-party beneficiary of the contract Watts and Williams made with Sampson Skins. Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...