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supersour supersour
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Three approaches to the application of the foreseen users' concept are (1) the Credit Alliance approach, (2) the Restatement of Torts approach, and (3) the foreseeable user approach. Summarize each of these three approaches.
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Auditing and Assurance Services


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elixy19elixy19
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The Credit Alliance approach upholds the concept of privity of contract established by the Ultramares Corporation v. Touche case. Under this approach, for an auditor to be liable to third parties, the auditor (1) must know and intend that the work product would be used by the third-party for a specific purpose, and (2) the knowledge and intent must be evidenced by the auditor's conduct.

Under the Restatement of Torts approach, foreseen users must be members of a reasonably limited and identifiable group of users that have relied on the CPA's work, such as creditors, even though those persons were not specifically known to the CPA at the time the work was done.

Under the foreseeable user approach, any users that the auditor should have reasonably been able to foresee as likely users of the client's financial statements have the same rights as those with privity of contract.

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