An investor or creditor believes that they have suffered harm due to the unexpected the bankruptcy of a large corporation:Required: Can that investor or creditor sue the auditor of the large corporation under contract law? Explain.If the investor or creditor chooses to sue the auditor of the large corporation under tort law, what must they prove before their claim can succeed?How can the auditor contest a claim of negligence?

Answered: An investor or creditor

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

An investor or creditor believes that they have suffered harm due to the unexpected the bankruptcy of a large corporation:

Required:

Can that investor or creditor sue the auditor of the large corporation under contract law? Explain.
If the investor or creditor chooses to sue the auditor of the large corporation under tort law, what must they prove before their claim can succeed?
How can the auditor contest a claim of negligence?

Expert Solution

Introduction

An investor or creditor is a person, to whom the company owes money. Creditors are the parties or suppliers of goods, who have supplied goods to the company on credit. Investors are the parties who have invested their money in the business in the form of share capital.