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Question
Saxon Inc. entrusted Thomas Simpson, an independent CPA, to prepare an audit report to apply for a loan from Sharp Lenders. Simpson merely accepted the accuracy of the client's books without proper investigation while representing that he had completed Saxon's audit. A careful audit, however, would have discovered that an employee of Saxon's was regularly embezzling funds from him. Simpson is:
A. liable to any creditor who extended a loan to Saxon Inc. based upon the audited financial statements.
B. not liable to Saxon Inc. to return the audit fee because credit was not extended by Sharp.
C. liable to Saxon Inc. for any losses he suffered as a result of Simpson's failure to discover the embezzlement.
D. not liable to any of the parties as he does not owe them the duty of skill or care.
Answer
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