Tuesday, September 3, 2019
Public accountants duty to provide due professional care in all their c
The situation that Willis and Company, CPAs have found themselves in regarding Geiger CompanyÃ¢â¬â¢s claim that Willis was negligent, underscores the need for public accountants to provide due professional care in all their contractual obligations. The level of fault that Willis is liable for can vary depending on the circumstances and approaches taken in examining this situation. This fact will be evident when examining this case from the Known User Approach, the Securities Act of 1933, as well as the Securities Act of 1934. These differing options result in varying degrees of liability that Willis and Company or any CPA firm can be held accountable for. Known User Approach When considering WillisÃ¢â¬â¢s actions under this Known User Approach, the New York Court of Appeals set the precedent in handling future cases. The New York Court determined that CPAs are held liable for ordinary negligence solely to the CPAÃ¢â¬â¢s client and specifically identified third parties (Whittington & Pany, 2012). In order for this to be true though, it must be evident that the company, in this instance Geiger and the specifically identified third parties are listed as specific users of the audit reports (Whittington & Pany). In relation to the loss incurred by the bank loaning funds based on misstated financial statements, the same precedent holds true. The bank, as a third-party beneficiary, must have been specifically named as a known party to the use of the auditorÃ¢â¬â¢s report in order to have a claim to recover the loss sustained (Whittington & Pany). The New York Court of Appeals further states that the third-party must not only be known or listed in the auditorÃ¢â¬â¢s report as a user but the said third-party must have take some sort of action to prove the ... ...934 also provides a greater protection to auditors as well, because it requires of proof of both misstatement and intent to cause harm as well as reduces liability proportionally. Under the Known User Approach, auditors can be liable for ordinary negligence, but the plaintiffs bringing suit must be specifically named in the statements for their allegations to be considered. These three approaches highlight the seriousness with which auditors and CPA firms should approach all established contracts in order to lessen the liability they face in carrying out their public duties. Works Cited Conahan, J., Nolette, P., & Young, A. (2003). Securities Fraud. The American Criminal Law Review. 40(2). Ps. 1041-1107. ProQuest doi: 230355736. Whittington, R., & Pany, K. (2012). Principles of auditing and other assurances (18th ed.). New York, NY: McGraw-Hill.