SLADE VS. FIELD: AUDITOR'S RESPONSIBILITY FOR THE RELIABILITY OF FINANCIAL STATEMENTS
Field & Company, a CPA firm, prepared and submitted audited financial statements for the Tyler Corp. Relevant facts apply to both the general situation and the specifics of the audit of the Tyler Corp.
With respect to the general situation, Slade, a raw material supplier, on the basis of the financial statements prepared by Field, extended unsecured credit in the amount of $2 million to the Tyler Corp. The Tyler Corp. Subsequently defaulted on its debts, and has insufficient assets to satisfy unsecured creditors. Following the financial failure of the Tyler Corp., it was discovered that Tyler's accounts receivable were overstated by $10 million, or 62.5 percent. The $16 million in stated accounts receivable accounted for two-thirds of the $24 million in total assets reported on the contested Tyler Corp. Financial statements.
Slade fled suit against Field & Co. To recover the $2 million loss. Slade contends that Field & Co. Was either negligent or guilty of fraud in this case, and in either event should be required to compensate Slade for the $2 million lo
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