Professional Negligence Legal Standards

Summary

In negligence cases, professionals must act as reasonably expected of their class. Auditors can defend themselves by showing they exercised appropriate skill and care. Accountants owe a duty of care to their client corporation, banks relying on financial statements, and majority shareholders, but not to all third parties who see and rely on the statements.

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A plaintiff sues an auditor for damages suffered because of an audit. Which of the following defence will protect the auditor from liability to the plaintiff? Group of answer choices The auditor exercised appropriate skill and care in the performance of the audit The auditor followed both generally accepted accounting principles and generally accepted auditing standards. The auditor did not know that the audit was in error. The plaintiff was contributorily negligent.
The strongest defense for the auditor would be:
- The auditor exercised appropriate skill and care in the performance of the audit.
This aligns with the legal standard of care demanded of a professional, which is to act as may reasonably be expected of the reasonably prudent professional in that class.
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To which of the following parties does a professional accountant preparing financial statements for a corporation not always owe a duty of care? Group of answer choices to the professional accountant's client corporation to all third parties that actually see the financial statements and rely on them to a bank that tells the accountant that it will reply on the financial statements to make a loan in the amount of $* million to a majority shareholder making a decision as to who should manage the corporation
A professional accountant does not always owe a duty of care to all third parties that actually see the financial statements and rely on them.
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which one of those items dot hey owe duty of care to
A professional accountant owes a duty of care to:
- The professional accountant's client corporation
- A bank that tells the accountant that it will rely on the financial statements to make a loan
- A majority shareholder making a decision as to who should manage the corporation
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