Summary
Accountant liability - Cover Story
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The 3 faces of liability.
The 3 Faces of Liability
A California toy manufacturing company was formed in the mid-1980s to create sophisticated toys. The company was initially immensely sucessful marketing "Teddy Ruxpin" talking bears and "Laser Tag" toy guns. The success was short-lived, however, and the company filed for Chapter 11 bankruptcy protection. In 1988, the investors sued a number of parties including the accounting firm that had audited the financial records of the company. In 1989, the Supreme Court of Alabama decided a case where a bank sued two accounting firms for malpractice in the audits of a mortgage company which defaulted on loan obligations totaling $2.5 million. Cases like these two recent decisions are being decided throughout the United States. For the last 60 years, our legal system has struggled with the problem of defining accountant malpractice liability toward third parties. To what extent should an accountant be held liable when providing an unqualifi...See the full content of this document
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