Choice "C" is correct. In most states, a CPA or accounting firm is liable not only to the client for negligence, but also to any person or foreseeable class of persons whom the CPA or firm knows will be relying on the CPA's work. Here, if the accounting firm knew that the purpose of the audit was to obtain a loan from a bank, the CPA could be held liable by any bank that made a loan based on a negligently performed audit.
Choice "a" is incorrect. The statute of limitations requires that a lawsuit be brought within a specified period of time. Although states vary as to the time in which lawsuits must be commenced, no state would preclude a lawsuit brought within fifteen months.
Choice "b" is incorrect. In most states, privity of contract is not required for a negligence action against an accounting firm. In addition to the client, the firm is liable to any person or foreseeable class of persons whom the CPA or firm knows will be relying on the CPA's work. Although not clear from the facts, it is likely that the bank can show the accountant had reason to know it would rely on the accountant's work.
Choice "d" is incorrect. There is no rule of privilege in the law concerning lawsuits between accountants and banks.