The King Surety Company wrote a general fidelity bond covering defalcations by the employees of Wilson,Inc.Thereafter,Cooney,an employee of Wilson,embezzled $17 200 of company funds.When the activities were discovered,King paid Wilson the full amount in accordance with the terms of the fidelity bond,and then sought recovery against Wilson's auditors,Lynch & Merritt,public accountants.Which of the following would be Lynch & Merritt's best defence?

Question

Quizplus · Accepted Answer

Lynch & Merritt's best defense would be that the embezzlement was a result of clever forgeries and collusive fraud that could not have been detected by an examination made in accordance with generally accepted auditing standards. This defense would argue that Lynch & Merritt fulfilled their duty of care and professional standards, and that the fault lies with the criminal actions of the employee.

The King Surety Company Wrote a General Fidelity Bond Covering