Accountant Liability 1 of 3 (26)

Question 1

Breach of Contract

Answer 1

Not fulfilling the terms of an engagement or agreement with a client, referred to as nonperformance, entitling the client, who is in privity, and any intended third-party beneficiaries, who are not in privity, to compensatory damages. Plaintiff must prove (MILE):

• Material misrepresentation or omission,
• Info caused harm,
• Lost money (damages), and
• Error caused the injury (Breach or nonperformance).

Question 2

Negligence

Answer 2

Failure to exercise due professional care in the performance of an engagement, making the accountant liable to other parties to the contract having privity and various other parties, including intended third-party beneficiaries and possibly including foreseen and foreseeable third-party beneficiaries. Plaintiff must prove (MILE):

• Material misrepresentation or omission,
• Info caused harm,
• Lost money (damages), and
• Error caused the injury (Lack of due diligence or Negligence).

Question 3

Privity

Answer 3

Being a “party to the contract” and, as a result, being entitled to remedies in the form of compensatory damages for the nonperformance by other parties to the contract.

Question 4

Fraud

Answer 4

Ineffective performance with the intent to deceive, making the auditor liable to those with or without privity, including intended, foreseen, foreseeable, and unforeseeable third-party beneficiaries, which may be actual fraud or constructive fraud. Plaintiff must prove (MILE):

• Material misrepresentation or omission,
• Info was Relied Upon,
• Lost money (damages), and
• Error caused the injury (Reckless or intentional misconduct – Actual or Constructive Fraud).