Legal Duties and Responsibility - Malpractice Liability

Question 1

What is proved in a “Common Law negligence contract”?

Answer 1

The CPA/ accountant did not use reasonable care expected of an accountant. Proof that audit was conducted as per GAAS will be a good defence

Question 2

Negligence vs Breach

Answer 2

In some jurisdictions - Breach is non performance of contracts and negligence is negligent performance

In other jurisdictions - all economic losses or injuries are breaches of contract or warranty. While personal injuries are under negligence

Question 3

Elements to be proved by plaintiff in negligence case

Damages in case of negligence

Answer 3

Duty, Breach, damages, proximate cause(the negligence is the cause of the injuries

only if injuries sustained and reasonably foreseeable injuries. No punitive damages in case of negligence

Question 4

Elements of Fraud

Answer 4

1) False misrepresentation of material facts 2) Actual knowledge of the false fact (Scienter) or Gross negligence or reckless disregard of truth (Constructive Fraud) 3) reasonable reliance 4) Sustained damages

Question 5

What are the different approaches to Negligence towards 3rd parties?

Answer 5

1) Privity approach of Ultramares vs Touche - Liable only to client and third party beneficiaries
2) Restatement of “limited class” - accountant liability to certain group of people who, the accountant knew, would use the information
3) reasonable foreseeability in the furture - same scope of liability as negligence