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Question
Winslow Manufacturing sought a loan from National Lending Corporation. In connection with the loan application, National required that Winslow submit certain audited financial statements. Winslow had an audit performed by an independent CPA, who submitted his report to Winslow under the presumption that his report was to be used solely for the purpose of negotiating a loan from National. After National rejected Winslow's loan application, Winslow submitted the CPA's report to other lenders in connection with its loan applications with them. It was subsequently learned that the CPA, despite the exercise of reasonable care, had failed to discover a sophisticated embezzlement scheme by Winslow's chief accountant. Under these circumstances, the CPA is:
A. liable to any creditor who extended a loan to Winslow.
B. liable to Winslow to return the audit fee because credit was not extended by National.
C. liable to Winslow for any losses Winslow suffered as a result of the CPA's failure to discover the embezzlement.
D. not liable to any of the parties.
Answer
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