Exam 43: Accountants Legal Liability

An accountant-client privilege is statutorily recognized in all states,permitting the accountant to refuse to disclose confidential information gleaned from his client.

An accountant is subject to potential civil liability arising from the professional services he provides to his clients and third parties.

In recent years,accountants have been subject to civil lawsuits based on the Racketeering Influenced and Corrupt Organizations Act.

For an accountant to be civilly liable under Rule 10b-5,the accountant must have acted with scienter.

An accountant who contractually promises to conduct an audit to detect possible embezzlement is under a contractual obligation to provide an expanded audit beyond generally accepted auditing standards.

Section 11 of the 1933 Securities Act imposes liability upon an accountant for negligence in the conduct of an audit.

An implied agreement in the contractual relationship is the agreement by the accountant to act in a competent and professional manner.