Author Question: Shareholders indirectly determine the management policies of the business. Indicate whether the ... (Read 45 times)

kwoodring · **on:** Jun 24, 2018

Shareholders indirectly determine the management policies of the business.
Indicate whether the statement is true or false

Question 2

Sara and Sally rely on the statements of Alice, an accountant. In a lawsuit brought by Sara and Sally against Alice for fraud, Alice seeks to avoid liability based on the fact that neither Sara nor Sally was in privity of contract with Alice. Alice knew Sara might rely on the financial information provided, but Alice did not know of Sally or anyone in her position. Can Sara and Sally recover against Alice?

olivia_paige29 · **Reply #1 on:** Jun 24, 2018

Answer to Question 1

TRUE

Answer to Question 2

Sara will be able to recover against accountant Alice for fraud because privity is immaterial in considering the issue of whether an accountant is liable for fraud.
Sally will not recover, however, because the third person must either be known to the accountant or a member of a class known to the accountant.