Helmut & Co., a public accounting firm, was the new

Helmut & Co., a public accounting firm, was the new auditor of Mountain Ltd., a private company in the farm equipment and supply business.
In early February 2015, Helmut & Co. began the audit for the year ended December 31, 2014. The audit was to be run by Frost, a senior who had just joined Helmut from another firm. Frost was to be assisted by two juniors.
Mountain, the president of Mountain Ltd., approached Frost and said that the Bank of Trail was prepared to increase its loan to Mountain upon receipt of the 2014 financial statements.
The juniors were assigned the accounts receivable and inventory sections, both of which were significant in relation to total assets, while Frost concentrated on the income statement and the remaining balance sheet accounts. The audit was finished quickly, and after a cursory review of the file and statements by Helmut, senior partner of Helmut & Co., the signed auditor's report was appended to the financial statements, which were delivered to Mountain, which, in turn, sent them to the bank.
The bank increased the loan significantly, principally on the basis of the very successful year the company had enjoyed despite the fact that the farm supply business was depressed. Several months later, Mountain Ltd. made an assignment in bankruptcy. The trustee found that many accounts receivable were still outstanding from the balance sheet date and that inventory on hand included substantial quantities of obsolete and damaged goods that had been included in the year-end inventory at cost. In addition, the year-end inventory amount included inventory that had been sold prior to the year-end. Bank of Trail sued Helmut & Co. for negligence.
REQUIRED
Discuss Helmut & Co.'s defence. Is lack of privity a defence in this case? Was Helmut & Co. negligent? Explain your answer fully.
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...