A financial institution sues the audit firm for failure to discover that a borrower's financial statements are materially misstated. This is an example of which of the following legal liability concepts?

Question

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This scenario describes a situation where a third party (the financial institution) is suing the audit firm for failure to detect material misstatements in the borrower's financial statements. This falls under the concept of liability to third parties under common law.

A Financial Institution Sues the Audit Firm for Failure to Discover