Watts and williams a cpa firm audited the accounts of sampson skins. the firm knew that sampson wanted that number of copies of the auditors report to furnish to the bank and other potential lenders auditirs supplied sampson with 20 copies upon completing the audit.
The balance sheet was misstated by $800,000.00.instaed of having a $600000 net worth the corporation was insolvent. assets were overstated by $500000 and a nonexisting accounts receivable of $300000 and inventory. the boxes were empty.Martinson relied on the audited financial statement loaned Sampson $200,000 he seeks to recover his loss from Watts.
Required: State whether each of the following is True or False . Explain
a. If Martinson alleges and proves negligence on the part of Watts and Williams , he will be able to recover his loss.
b If Martison alleges and proves constructive fraud he will recover his
lose.
c Martison does not have contract with with Watt and Williams.
d Martinson is a third party beneficiary of the contract, Watts and Williams made with Sampson Skins.
e .unless actual fraud on the part of Watts and Williams can be shown, Martinson can not recover.