The Liability of Accountants to Non-Clients for Professional Malpractice, written by Leon P. Gold, Esq., Retired Partner., and Richard L. Spinogatti, Esq., Senior Counsel, Proskauer Rose, LLP, identifies and explains each of the standards under which the liability of accountants to non-clients is considered by the courts. Those standards have developed through the common law and, in some instances, have been legislated in each of the fifty states.
This Portfolio also examines how engagement letters and representation letters may be used as risk management tools to avoid or minimize potential exposure to claims of professional malpractice.
As part of that examination, The Liability of Accountants to Non-Clients for Professional Malpractice discusses the professional standards on engagement letters and representation letters and considers cases in which determinations of liability have been influenced by the content of those letters.
Examples of illustrative engagement letters accompany this Portfolio.
This Portfolio includes a state-by-state survey of the legal standards for the liability of accountants to non-clients. For each state, key cases or statutes are identified and analyzed. Relevant statutes, principal cases and the provisions of Restatement (Second) of Torts § 552 (1977) accompany the Portfolio.
The Liability of Accountants to Non-Clients for Professional Malpractice allows you to benefit from:
This Portfolio is included in the Accounting Policy & Practice Series, a comprehensive series of titles which explain, explicate, and offer commentary on a wide range of accounting and financial management topics, including revenue recognition, income taxes, leasing, business combinations, debt instruments, risk management, internal controls and more.
Detailed Analysis
I. Preface
II. The Sources of the Rule of Law for the Liability of Accountants to Non-Clients for Professional Malpractice
Introductory Material
A. The Privity Standard
B. The Near Privity Standard
C. The Restatement Standard
D. The Reasonable Foreseeability Standard
E. The Balancing Test
F. The Legislative Standards
III. Engagement Letters and Representation Letters As Risk Management Tools
IV. Professional Standards on Engagement Letters and Representation Letters
A. Engagement Letters
B. Representation Letters
V. Principles and Trends in Case Law
1. Kitchens of the Oceans, Inc. v. McGladrey & Pullen, LLP
2. In re Refco, Inc. Sec. Litig.
3. Williamson v. PricewaterhouseCoopers LLP
1. Dapremont v. Overcash, Walker & Co., P.C.
2. Ladd Furniture Inc. v. Ernst & Young
3. Ameriwood Industries International Corporation v. Arthur Andersen & Co.
4. Begier v. Price Waterhouse
5. Seafirst Corporation v. Jenkins
6. Mid-Continent Paper Converters Inc. v. Brady, Ware & Schoenfeld Inc.
7. Lumbermens Mutual Casualty Company v. Thornton
8. Rino v. Mead
9. Chemd Inc. v. KPMG Peat Marwick, L.L.P.
10. National Medical Transportation Network v. Deloitte & Touche
11. Unadilla Silo Co., Inc. v. Ernst & Young
12. Carnegie Int'l Corp. v. Grant Thornton, LLP
13. Alff v. State Pers. Comm'n
VI. State by State Survey of Legal Standards
A. Overview
B. Specific States
1. Alabama
2. Alaska
3. Arizona
4. Arkansas
5. California
6. Colorado
7. Connecticut
8. Delaware
9. District of Columbia
10. Florida
11. Georgia
12. Hawaii
13. Idaho
14. Illinois
15. Indiana
16. Iowa
17. Kansas
18. Kentucky
19. Louisiana
20. Maine
21. Maryland
22. Massachusetts
23. Michigan
24. Minnesota
25. Mississippi
26. Missouri
27. Montana
28. Nebraska
29. Nevada
30. New Hampshire
31. New Jersey
32. New Mexico
33. New York
34. North Carolina
35. North Dakota
36. Ohio
37. Oklahoma
38. Oregon
39. Pennsylvania
40. Rhode Island
41. South Carolina
42. South Dakota
43. Tennessee
44. Texas
45. Utah
46. Vermont
47. Virginia
48. Washington
49. West Virginia
50. Wisconsin
51. Wyoming
Working Papers
TABLE OF WORKSHEETS
Worksheet 1 Arkansas Statute
Worksheet 2 Illinois Statute
Worksheet 3 Kansas Statute
Worksheet 4 Michigan Statute
Worksheet 5 Mississippi Statute
Worksheet 6 New Jersey Statute
Worksheet 7 Tennessee Statute
Worksheet 8 Utah Statute
Worksheet 9 Wyoming Statute
Worksheet 10 Ultramares Corporation v. Touche Court of Appeals of New York (255 N.Y. 170; 174 N.E. 441; 1931 N.Y. LEXIS 660; 74 A.L.R. 1139)
Worksheet 11 Credit Alliance Corporation v. Arthur Andersen & Co. Court of Appeals of New York 65 N.Y.2d 536; 483 N.E.2d 110; 493 N.Y.S.2d 435; 1985 N.Y. LEXIS 15157 (1985)
Worksheet 12 H. Rosenblum Inc. v. Adler Supreme Court of New Jersey 93 N.J. 324; 461 A.2d 138 (1983)
Worksheet 13 Restatement (Second) of Torts § 552
Worksheet 14 AICPA Ethics Interpretation 101-3-Performance of Nonattest Service
Worksheet 15 Ratcliffe, New Guidance for Compilation and Review Engagements
Worksheet 16 AICPA Sample Engagement Letter - Compilation of Personal Financial Statements
Worksheet 17 AICPA Sample Engagement Letter - Compilation of Financial Statements Not Intended for Third Party Use
Worksheet 18 AICPA Sample Engagement Letter - Review of Personal Financial Statements
Worksheet 19 AICPA Sample Engagement Letter - Audit of Personal Financial Statements
Worksheet 20 Sample Engagement Letter - Audit: Financial Statements (Camico Mutual Insurance Company)
Worksheet 21 Sample Engagement Letter - Compilation - Management-Use-Only Financial Statements (SSARS 8) (Camico Mutual Insurance Company)
Bibliography
OFFICIAL
Statutes:
Secuities and Exchange Commission:
Court Cases:
State Law:
American Institute of Certified Public Accountants:
Public Company Accounting Oversight Board:
UNOFFICIAL
Books and Articles: