Lancaster & Co

question 9

Multiple Choice

Lancaster & Co. CPAs is auditing the financial statements of Cooper Corporation. During the course of the audit, Cooper Corporation sent the following memo to the engagement partner:
We have requested $1 million worth of products from Ladd Corporation with credit terms of net 30 days. Ladd has requested audited financial statements for its credit decision. We notified Ladd that our annual audit was in process and we would provide the audited financial statements to them as soon as they were completed.
Which of the following statements is true with regards to this memo?

• A)The memo is an amendment to the engagement letter and makes Ladd Corporation a primary beneficiary of the audited financial statements.
• B)The memo may move Ladd Corporation closer to a primary beneficiary and reposition them as third party with a standing to sue, depending on the jurisdiction of any future lawsuits
• C)The memo is only a courtesy and does not alter the terms of the engagement letter or change the nature of Ladd Corporation’s standing to sue.
• D)The memo is an additional contract placing Ladd in privity of contract.

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Definitions:

User Cost

The opportunity cost of using a durable good, which includes the depreciation of the good and any cost associated with its use, such as maintenance.

Enforceable Property Rights

The legal recognition of an individual's or entity's claims to ownership, which can be defended and upheld in court.

Closer To Extinction

A state or condition where a species is at greater risk of ceasing to exist.

Private Property

The legal right that allows individuals to own, use, and transfer objects, land, and intellectual property.