What are the rights and liabilities of p and johnson

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Reference no: EM131390709

Johnson Enterprises, Inc., contracted with the accounting firm of P, A & E to perform an audit of Johnson. The accounting firm performed its duty in a nonnegligent, competent manner but failed to discover a novel embezzlement scheme perpetrated by Johnson's treasurer.

Shortly thereafter, Johnson's treasurer disappeared with $75,000 of the company's money. Johnson now refuses to pay P, A & E its $20,000 audit fee and is seeking to recover $75,000 from P, A & E.

a. What are the rights and liabilities of P, A & E and Johnson? Explain.

b. Would your answer to (a) differ if the scheme was a common embezzlement scheme that generally accepted accounting standards should have disclosed? Explain.

Reference no: EM131390709

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