Lauren hires Humphrey,a CPA,to audit her financial statements.The engagement letter includes a statement acknowledging that audited financial statements are needed for a filing with a regulatory body.Humphrey completes the audit and issues an unqualified opinion.Based on the audited financial statements,Key Largo Bank approves a loan to Lauren.Four months later,Lauren files for bankruptcy.Key Largo Bank would most likely sue Humphrey claiming

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Key Largo Bank was a foreseeable party as its need for audited financial statements was acknowledged in the engagement letter. However, it was not in privity of the contract and was not a primary beneficiary.

Lauren Hires Humphrey,a CPA,to Audit Her Financial Statements