Question: The auditing firm of Timm Schmidt Co prepared annual
The auditing firm of Timm, Schmidt & Co. prepared annual financial statements for Clintonville Fire Apparatus, Inc. (CFA). CFA showed these statements to Citizens State Bank and asked for loans. On the basis of the financial statements, Citizens loaned CFA approximately $380,000. Timm later discovered that the financial statements overvalued CFA by more than $400,000. Citizens demanded repayment of the loans. CFA could not pay the balance, and Citizens sued Timm and its malpractice liability insurer. They raised the defense that the suit was barred by lack of privity and the fact that no one in the Timm firm knew that CFA intended to use the financial statements to obtain loans from anyone. Is the lack of privity a defense? [Citizens State Bank v. Timm, Schmidt & Co., 335 N.W.2d 361 (Wis.)]
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