What would be bakers best defense

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Reference no: EM133494927

Question: American Corp. retained Baker, CPA, to conduct an audit of its financial statements to obtain a bank line of credit. American signed an engagement letter drafted by Baker that included a disclaimer provision. As a result of Baker's failure to detect a material misstatement in American's financial statements, the audit report contained an unmodified opinion.

Based on American's audited financial statements, National extended credit to American. American filed a petition in bankruptcy shortly thereafter. National sued Baker for damages based on common law fraud. What would be Baker's best defense?

American Corp. retained Baker, CPA, to conduct an audit of its financial statements to obtain a bank line of credit. American signed an engagement letter drafted by Baker that included a disclaimer provision. As a result of Baker's failure to detect a material misstatement in American's financial statements, the audit report contained an unmodified opinion.

Baker included a disclaimer provision in the engagement letter with American.

National was not in privity with Baker.

Baker lacked the intent to deceive.

Baker acted with due diligence in conducting the audit.

Reference no: EM133494927

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