An accountant must possess the skills that an ordinarily prudent accountant would have and exercise the degree of care that an ordinarily prudent accountant would exercise.
· The skills and care of an ordinarily prudent accountant are reflected in the generally accepted accounting principles ("GAAP") promulgated by the Financial Accounting Standards Board ("FASB"), and the generally accepted auditing standards ("GAAS"), promulgated by the American Institute of Certified Public Accountants ("AICPA").
An accountant conforming to GAAP or GAAS and acting in good faith, will normally not be held liable for incorrect judgments or for relying on incorrect information.
· On the other hand, a violation of GAAP or GAAS will be prima facie evidence of the accountant's negligence.
An attorney owes her client the duty to provide competent and diligent representation.
An attorney must know well-settled principles of law applicable to a case and discover what law can be found through a reasonable amount of research.
An attorney's competence and diligence are judged against those of a reasonably competent general practitioner of ordinary skill, experience, and capacity, ups the attorney holds herself out as being expert in some area of law, in which case she is held to the higher standard of care expected of a reasonably competent expert practitioner in that area of the law.
"Ultramares Rule": An accountant only owes a duty of care to those persons for whose primary benefit the accountant's statements were intended, namely:
persons in privity with the accountant; and
third parties whose relationship with the accountant was "so close as to approach that of privity."
Restatement Rule: Section 552(2) of the Restatement (Second) of Torts extends the "Ultramares Rule," holding that accountants are also liable to third parties
for whose benefit and guidance the accountant intends to supply the information or knows that the recipient intends to supply it; or
whom the account intends the information to influence of knows that the recipient so intends.
Reasonably Foreseeable Users: A minority of courts hold accountants liable to any user whose reliance on the accountant's report was reasonably foreseeable to the accountant at the time she prepared the report.
ACCOUNTANT'S SECTION 11 LIABILITY
An accountant may be liable for misstatements and omissions of material facts in a registration statement.
· An accountant's Section 11 liability extends to claims by anyone who acquires a security covered by the registration statement.
A purchaser need not prove that she relied on the misstatement or omission to hold the accountant liable.
· Nor is a purchaser required to prove that she was in privity with the accountant.
Due Diligence Defense: An accountant can avoid Section 11 liability if he can show that, after reasonable investigation, he had reasonable grounds to believe, and did believe, that the financial statements were true and complete at the time the accountant made them.
ACCOUNTANT'S SECTION 18 LIABILITY
An accountant who makes or causes to be made a false or misleading statement in any application, report, document, or registration statement filed with the Securities and Exchange Commission may be liable to a purchaser or seller of a security if:
The false or misleading statement affected the price of the security; or
The purchaser or seller relied on the false or misleading statement in making his purchase or sale, and did not know that the statement was inaccurate.
Good Faith Defense: Even if one or both of the above applies, an accountant may escape Section 18 liability if she can prove that:
(1) she had no knowledge that the statement was false or misleading, and
(2) she had no intent to mislead the purchaser or seller.
CONFIDENTIALITY AND PRIVILEGE
An accountant's working papers -- the notes, computations, memoranda, copies and other papers that make up the accountant's work product -- remain the property of the accountant, subject to the following provisos:
The client has the right to have access to those working papers relating to the client; and
The accountant must obtain the client's permission before transferring the working papers to another accountant or otherwise making them available for review by someone other than the client.
Attorney-Client Privilege: All communications between an attorney and her client are confidential, to the extent that they relate to the rendition of professional services and, therefore, are privileged and may not be disclosed without the client's permission.
Accountant-Client Privilege: Communications between an accountant and his client are, likewise, confidential; and, in some, but not all, states, are treated as privileged and may not be disclosed without the client's permission. However, in many cases, they still may be disclosed under court order. THIS IS NOT THE SAME AS AN ATTORNEY/CLIENT PRIVILEGE. There is also a limited privilege for certain non criminal tax matters and work papers.