Accountant Liability- Section 10

Question 1

Foreseen party

Answer 1

A third party or a member of limited class that the accountant knew would be relying on the financial statements for a limited transaction. Accountant is liable to foreseen parties for negligence

Question 2

Foreseeable parties

Answer 2

Any party the accountant could reasonably foresee would receive financial statements and use them. The accountant is not usually liable for negligence to for seeable parties

Question 3

C A M P S

Answer 3

Plaintive needs to prove camps or mile to win the case on negligence

Causal relationship: behavior of the accountant must be the proximate cause of the harm to the plaintive.

Absence of due care: performed audit in a careless manner

Material miss statement: the financial statements must have contained material miss statement or omissions

Privity or equivalent: plaintiff needs proper standing to sue for negligence

Question 4

Duty of due care

Answer 4

State and federal statutes

Court decisions. Contract with the client. GAAS and gap GAAP. Customs of the profession

Question 5

Fraud

Answer 5

Intent to deceive
Actual fraud making false statements with knowledge of there a fall city. Knowing there is a misstatement and making an opinion. Being bribed.

Constructive fraud: gross negligence – making false statements with a reckless disregard for truth, not knowing if the statements are true or false, opinion on statements that haven’t been audited

On exam assume ordinary negligence

Question 6

R I M S

Answer 6

Plaintiff must Proof of rims or mile

Reliance- plaintiff must have relied on the financial statements

Intent to deceive – auditor must’ve had actual or constructive knowledge that their opinion was inappropriate

Material miss statement – the financial statements must’ve contained material miss statement or omissions
Suffered loss – plaintive must’ve suffered a financial loss

Question 7

Fraud defenses

Answer 7

Not gross negligent followed GAAS

Not material
Good faith and no knowledge of falsity : auditor can claim lack of knowledge of false financial statements

Burden of proof is on the plaintive, exam questions in which all. Have not been established should be decided in favor of the auditor – defendant. Also note that punitive damages are not levied under common common law.

Question 8

Privity

Answer 8

Needed for a cross negligence case. Privity need not apply any fraud case privity the fence wouldn’t be useful in a case even if it includes gross negligence