What are the three rules used to determine the accountant's liability to third parties?
What will be an ideal response?
The first, and oldest, rule is often referred to as the Ultramares Doctrine. Under this rule, the accountant is liable only to those in a privity-of-contract relationship. In other words, only the party who contracted for the accountant's work may sue.
A somewhat more liberal rule is found in Section 552 of the Restatement (Second) of Torts. This rule holds that accountants will be liable to a limited class of intended users of the information. Thus, the accountant owes a duty to the client and any class of persons the accountant knows is going to be receiving a copy of his or her work.
The broadest rule applies in an extremely limited number of states. The smallest minority of states holds the accountant liable to any reasonably foreseeable user of the statement the accountant prepares.
You might also like to view...
The method of entering a foreign market that presents the least amount of risk for a company is ________
A) joint venturing B) direct investment C) exporting D) joint ownership E) contract manufacturing
A confusing "quirk" of international exchange rates occurs when calculating the percentage change in spot rates from one period to another
The percent change in the spot rate from one period to another when quoted using foreign currency terms is always greater than the percent changes quoted when using home currency terms. Indicate whether the statement is true or false.