15 art 6 (continued) Types of Third parties parties. Classify the independent si
ID: 2600836 • Letter: 1
Question
15 art 6 (continued) Types of Third parties parties. Classify the independent situations shown below as (b) Foreseen; or (c) Foreseeable (reasonably foreseeable). 1. A potential purchaser of a business who asks for audited In class we noted that there are different types of third either (a) Primary beneficiary (Identified User: Near Privity): financial statements of that business and is known to the auditor. 2. A potential purchaser of a business who asks for audited financial statements of that business and is NOT known to the auditor. However, the auditor knows that his or her client has asked for an audit because of an intention to sell the business. 3. A purchaser of a business who, not known to the auditor, relied on the audited financial statements to help make the decision to buy the business. The auditor had been led to believe that the client would use the financial statements only for a bank loan. 4. A local bank which, as a condition of a bank loan, requires that audited financial statements be furnished to it by the borrower' s auditors. There is no other reason for the audit. The auditor is aware of the need for the audit (bank loan) and that the auditor's report will be given to the local bank. s. A vendor who sold inventory to a company. Answers: Type of third Party Use letters! 4.Explanation / Answer
Primary Bebeficiary--are specifically identified to Auditors as the beneficiary of audit services.The auditor will not engage if it was not for primary beneficiary
Foreseen third parties--are not specifically identified as beneficiary to audit services,even the auditor knows their general identity and specific purpose of an audit report
Foreseeable third parties--are parties who have reasonable need to rely on the entitys financial statements but because they are the farthest removed from a contractual agreement of the audit services.Generally enjoy the least favorable position in auditor liability cases.
Answers
1.Primary Beneficiary
2.Foreseen third party
3.Foreseeable third party
4.Primary beneficiary
5.Primary beneficiary
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.