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.

Question

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.

Quizplus · Accepted Answer

The memo indicates that Ladd Corporation is requesting audited financial statements for credit decision purposes, which could potentially give them standing to sue as a third party. However, whether or not they are considered a primary beneficiary would depend on the specific circumstances and jurisdiction of any potential lawsuits. The memo does not amend the engagement letter or create an additional contract placing Ladd in privity of contract. It is a courtesy notification.