Exam 47: Accountants Liability and Malpractice

__________ courts impose liability on the accountant to a total stranger who gets possession of the accountant's work and then sustains a loss because of a false statement in the work.

For accountants,fraudulent malpractice always involves upgrading the financial condition of the firm.

In contrast to contributory negligence principles,comparative negligence principles are never applied to malpractice situations.

An accountant may be able to raise the defense of lack of privity in a malpractice suit:

The "known user" rule imposes liability on the accountant for negligent malpractice when he or she can foresee the parties who will rely on his work in the financial statements.

Some states have rejected the requirement of privity but not adopted any set rule.Instead,these states function under the __________ rule.

In an action for breach of contract,the statute of limitations runs from the date on which the harm is discovered.

Sara and Sally rely on the statements of Alice,an accountant.In a lawsuit brought by Sara and Sally against Alice for fraud,Alice seeks to avoid liability based on the fact that neither Sara nor Sally was in privity of contract with Alice.Alice knew Sara might rely on the financial information provided,but Alice did not know of Sally or anyone in her position.Can Sara and Sally recover against Alice?

Unidentified members of a certain class may sue for negligent malpractice in states that follow the __________ rule.

Breach of contract remedies are available to third parties against accountants because they are ordinarily considered third-party beneficiaries of contracts with accountants.

A disclaimer that protects an accountant from liability for inaccurate reporting of certain specified financial information will be held valid if the accountant had no means of examining the information.

Herman hires Juanita as his accountant.Juanita commits negligence in preparing financial statements for a business Herman owns.Several investors rely on the financial statements and purchase shares of stock in the business.In a state that has adopted the privity rule,what result?

Accountants are equally liable to interlopers and rightful third parties.