Malpractice Liability Flashcards
D, accountant, contracts to do audit for client. D mishandles the job and employees steal large sums. Client sues D in negligence. Will plaintiffs recover under a) privity? b) restatement? c) foreseeability?
a) yes
b) yes
c) yes
D contracts to do audit for client. Letter of engagement specifies that the audit is for the benefit of ABC bank, which will use the certified financial statements to determine whether to double client’s current line of credit at the bank. D mishandles the job certifying financial statements that vastly overstate client’s worth. ABC doubles the line of credit but loses tons of money when client goes under. ABC sues D in negligence. Will plaintiffs recover under a) privity? b) restatement? c) foreseeability?
a) yes
b) yes
c) yes
Client calls D and asks D to audit and certify a copy of its financial statements so that it may borrow money. During audit, D learns that client will probably borrow from ABC Bank and calls ABC Bank to ask if it has any particular concerns about client’s status that D should pay special attention to during the audit. D certifies the financial statements, which vastly overstate client’s worth. Client sends financial statements to ABC, which makes loan based thereon. ABC sues D in negligence. Will plaintiffs recover under a) privity? b) restatement? c) foreseeability?
a) no
b) yes
c) yes
Client calls D and asks D to audit and certify five copies of financial statements which, it tells D, it intends to provide to five unidentified banks in the area in hopes of receiving a loan. D certifies the financial statements, which vastly overstate client’s worth. Longhorn National Bank, which loans money to client based on the financial statements, later sues D in negligence. Will plaintiffs recover under a) privity? b) restatement? c) foreseeability?
a) no
b) yes
c) yes
Client calls D and asks D to audit and certify 80 copies of financial statements. Client tells D that it intends to seek lenders and/or investors. D certifies the financial statements, which vastly overstate client’s worth. ABC Bank makes loan based on the financial statement and later sues D in negligence. Will plaintiffs recover under a) privity? b) restatement? c) foreseeability?
a) no
b) no
c) yes
Client calls D and asks D to audit and certify one copy of financial statements. Client tells D that it intends to show the statements to its long-time banker in hopes of receiving an extension of current line of credit. Instead, client shows copies of the financial statements to several out-of-state banks that loan money to client and later sue D when they discover the financial statements were error filled. Will plaintiffs recover under a) privity? b) restatement? c) foreseeability?
a) no
b) no
c) no
