Malpractice Liability Flashcards
What occurs when the breach of a contract is minor?
In common law, if a breach is only minor, the non breaching party is not discharged from the terms and conditions of the contract but is entitled to damages.
Define “breach of contract”.
Failure to perform substantially as agreed under contract.
List the two types of agreements.
Express or implied.
What types of damages can a tax client recover?
Compensatory damages, but not punitive.
Define “standard”.
That degree of judgement and skill possessed by a reasonable accountant under all the circumstances.
Define “actual fraud”.
Fraud is an intentional tort that is made with scienter or a knowledge to deceive.
Define “constructive fraud”.
reckless disregard or gross negligence.
What must be proven by a contracting party to establish the defense of fraud?
- Misrepresentation or omission of fact
- Materiality
- Scienter
- Reasonable reliance
- Damages
Describe the Reasonable Foreseeability Approach to accountant liability.
The accountant is liable to whomever he/she can reasonably foresee may use the financial statements he/she certifies or prepares.
Describe the Privity Approach of Ultrameres v. Touche to accountant liability.
The accountant is liable only to those with whom he/she is in privity of contact.
List the three primary approaches to accountant liability.
- The Privity Approach of Ultramares v. Touche
- The Restatement of “Limited Class” Approach
- The Reasonable Foreseeability Approach.
Describe the Restatement of “Limited Class” Approach to accountant liability.
The accountant has third-party liability to a limited class of known or intended users of financial statements whose specific identity need not be known by the CPA.
