Accountants Legal Liability

Question 1

What are the four opinions an auditor can give?

Answer 1

1- Unqualified (clean)

2- Qualified (follow GAAP usually)

3- Adverse (significant GAAP departure - auditor open to liability)

4- Disclaimer (unable to complete, cant express opinion)

Question 2

Do GAAS and GAAP represent minimums or maximums in behavior on the part of auditors?

Answer 2

minimums

Question 3

What are the 6 elements of negligence.

Answer 3

1- Voluntary act/omission

2- Duty of care owed to the plaintiff

3- Breach of that duty (did it meet what a reasonable accountant would do or is it below)

4- Judicially recognized injuries/damages (jury steps into shoes)

5- Actual causation (if opinion wasn’t there then would problem remain?)

6- Proximate cause (line where domino’s responsible for stops)

Question 4

How does a breach of duty take place in the claim of negligence?

Answer 4

If an accountant performs below what can reasonably be expected then they are in breach.

Question 5

What new idea was brought about through the case of McPherson v. Buick Motor Corp. (pedestrian hit by car, and sues car company for bad wheel.)

Answer 5

Foreseeability should define the parameters of duty. This means the pedestrian didn’t have to have a contractual relationship with the car company to receive favorable judgment.