FMC Electronics Ltd Engaged the Accounting Firm of Crosby, Seals

Multiple Choice

FMC Electronics Ltd engaged the accounting firm of Crosby, Seals & Anderson to perform its annual audit. The firm performed the audit in a competent, non-negligent manner and billed FMC for $16 000, the agreed fee. Shortly
After delivery of the audited financial report, Robert Hightower, the assistant controller, disappeared, taking with him
$28000 of FMC's funds. It was then discovered that Hightower had been engaged in a highly sophisticated, novel
Defalcation scheme during the past year. He had previously embezzled $35 000 of FMC's funds. FMC has refused
To pay the auditor's fee and is seeking to recover the $63 000 that was stolen by Hightower. Which of the following
Is correct?

A) The auditor cannot recover the audit fee and is liable for $63 000.
B) The auditor is entitled to collect the audit fee and is not liable for $63 000.
C) FMC is entitled to recover the $28 000 defalcation and is not liable for the $16 000 fee.
D) FMC is entitled to rescind the audit contract and thus is not liable for the $16 000 fee, but it cannot recover damages.