From: Jingjing He
To: Dr. Mark Linville
Date: 1/Feb/2015
Subject: Determine third party liability
Recently, I have been appointed Chief Justice of the newly created state of Freedonia. One of my responsibilities is to determine the appropriate third- party liability standards for Freedonia.
Third-party liability standards are used by court to determine which parties have the right to seek recovery from the auditor who negligently prepares a faulty audit report. There are four general standards that the third party can sue the auditor for a negligently-prepared audit. The first one is privity, it means that only the contract party and designated users have the right to sue the auditor. the second one is near- privity, it means contracting party and identified users, the third one is foreseen class, which means contracting party, identified users and any member of the same class as the identified users. The last one is foreseeable, which means any user who was reasonable foreseeable by the auditor.
If you want to sue the defendant auditor, the plaintiff must say why the auditor did something wrong. we got three categories: negligence, gross negligence, and fraud. The minority rule for negligence involve client, third party. The majority rule for negligence involve client, third party, and foreseen parties. The majority for gross negligence and Fraud involve client, third parties, foreseen parties, and foreseeable parties.
There are some categories to determine the