Section 10: Accountant Liability

Question 1

Breach of Contract

Answer 1

• Compensatory damages
• Who can sue?
  
  • Anyone in privity
  • Intended 3rd party beneficiary (named in contract)
• Plantiff must prove MILE
• Defense
  
  • did not breach or fully performed under contract terms

Question 2

Plantiff must prove MILE

Answer 2

• Material misstatement or omission
• Info on F/S was proximite cause for harm
• Loss - must prove financial loss
• Error - caused by breach

Question 3

Tort: Negligence (Foreseen User)

Answer 3

• Who can sue?
  
  • Anyone in privity
  • Anyone known and foreseen by CPA
• Plantiff must prove MILE and Error
  
  • Error - No due care
• Defense
  
  • Adhere to GASS
  • Lack of privity

Question 4

Fraud

Answer 4

• Who can sue?
  
  • Anyone
• Plantiff must prove MILE
  
  • Info was relied on
• Actual fraud - intent to deceive - scienter
• Constructive fraud - reckless disregard
• Defense
  
  • Not gross negligent
  • not material

Question 5

Securities Act of 1933 - Section 11

Answer 5

• Anyone who signs a registration statement is liable for all damages casused by misstatement
• Who can sue?
  
  • Anyone - no privity needed
• Plantiff must prove
  
  • Sufferd Loss
  • Included in prospectus
  • Material misstatement
• Defenses
  
  • Followed GAAS
  • Plantiff knew prospectus was inaccurate
  • Must show not negligent

Question 6

Securities Exchange Act of 1934

Answer 6

• Any written or oral statements or omissions
• Plantiff must prove MILE
• Must prove relied on data