COMM 455 Lecture Notes - Lecture 5: Internal Control, Engagement Letter, Trust Company
Document Summary
Did not do what a person expected a reasonable auditor would do. Not properly supervise, did not take sufficient sample. 3rd parties: engagement letter what we agreed to, my and your responsibility, case law: Ultramares corp v. touche: can"t sue auditor b/c no privity in contract, no duty of care. Hedley byrne & co v. heller: duty on care for reasonably foreseeable 3rd party. Unlimited anyone who might rely on f/s too broad. Part of a limited class who auditor is aware might rely on f/s. Name of specific 3rd party too narrow. Group investors m trust company mortgages. Touche made adjustment, knew company wouldn"t collect money. Not enough to comply with handbook, technicalities (uncertain) add notes to avoid ambiguity. Touche lost; f/s must not be misleading. Don"t owe duty of care to s/h, owe duty to company. Individual investor, s/h who appointed auditor, can"t sue if auditor messed up but company can.
