Accountant Liability Flashcards
Who can sue under Breach of Contract?
Privity
Intended 3rd party beneficiary by client
What does plaintiff prove under Breach of Contract?
MILE Material misstatement or omission Info caused harm Lost money Error caused injury, such as breach of contract or nonperformance
What are defenses for Breach of Contract?
Did not breach contract
Who can sue under Negligence?
Privity
Known or Foreseen by CPA
What does plaintiff prove under Negligence?
MILE Material misstatement or omission Info caused harm Lost money Error caused injury, such as lack of due diligence or negligence
What are defenses for Negligence?
Followed GAAS
Lack of privity
What is considered negligence?
NEG:
Nondisclosure of information to client
Error previously discovered not corrected
GAAS / GAAP not followed
What is Ultramares Act?
Foreseen 3rd party lacks privity
Who can sue under Fraud or Gross Negligence?
Anyone
Unforeseen users
What does plaintiff prove under Fraud or Gross Negligence?
MILE Material misstatement or omission INFO WAS RELIED UPON Lost money Error caused injury, such as reckless or intentional misconduct
What is actual fraud?
Making false statements with knowledge of their falsity
Also called scienter - intent to deceive
What is constructive fraud (gross negligence)?
Making false statements with reckless disregard for truth, not knowing if it is right or wrong
What are defenses for Fraud or Gross Negligence?
Did not act grossly negligent
Not material
Who can sue under 1933 Securities Act?
Anyone
No privity needed
What does plaintiff prove under 1933 Securities Act?
ML
Material misstatement or omission
Lost money
