Lancaster & Company,CPAs,is auditing the financial statements of Cooper Corporation.During the course of the audit,Cooper 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 regard to this memo?

Question

Quizplus · Accepted Answer

The memo from Cooper to the engagement partner, stating that audited financial statements would be provided to Ladd, may move Ladd closer to being considered a primary beneficiary with a standing to sue, depending on the jurisdiction of any future lawsuits. This could potentially reposition Ladd from being a third party to having a closer relationship with the auditors and the audited financial statements. However, it does not amend the engagement letter or create privity of contract with Ladd, so options A and D are incorrect. Option C is partially true in that the memo is a courtesy and does not change Ladd's standing to sue, but it does have implications for Ladd's position as a potential primary beneficiary.

Lancaster & Company,CPAs,is Auditing the Financial Statements of Cooper Corporation