Question

Wanda Young, doing business as Wanda Young Fashions, engaged the CPA partnership of Scott & Green to audit her financial statements. During the audit, Scott & Green discovered certain irregularities that would have indicated to a reasonably prudent auditor that James Smith, the chief accountant, might be engaged in a fraud. However, Scott & Green, not having been engaged to discover defalcations, submitted an unqualified opinion in its report and did not mention the potential defalcation problem.

Required:
What are the legal implications of the above facts as they relate to the relationship between Scott & Green and Wanda Young? Explain.



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  • CreatedOctober 25, 2014
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