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Chapter 34 Outline - 51ppt

Chapter 34 Outline - 51ppt - CHAPTER 34 OUTLINE I POTENTIAL...

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C HAPTER 34 O UTLINE I. POTENTIAL LIABILITY TO CLIENTS A. L IABILITY FOR B REACH OF C ONTRACT For a professional’s breach of contract, a client can recover damages, including expenses  incurred to secure another professional to provide the services and other reasonable and  foreseeable losses. B. L IABILITY FOR N EGLIGENCE Professionals must exercise the standard of care, knowledge, and judgment generally  accepted by members of their professional group. 1. Accountant’s Duty of Care a. Comply with Accounting Principles and Standards Accountants must comply with generally accepted accounting principles (GAAP)  and generally accepted auditing standards (GAAS) (though compliance does not  guarantee   relief   from   liability).   Violation   of   either   is   prima facie   evidence   of  negligence. Note: there may be a higher state law standard. b. Act in Good Faith If an accountant conforms to GAAP and acts in good faith, he or she will not be  liable to a client for incorrect judgment. c. Investigate Suspicious Financial Transactions An   accountant   who   uncovers   suspicious   financial   transactions   and   fails   to  investigate the matter fully or to inform his or her client of the discovery can be  held liable to the client for the resulting loss. d. Qualify or Disclaim Opinions An accountant is not liable for damages resulting from whatever is qualified or  disclaimed. e. Designate Financial Statements as Unaudited An   accountant   may   be   liable   for   failing   to   designate   a   balance   sheet   as  “unaudited.” An accountant may also be liable for failing to disclose to a client  facts that give reason to believe misstatements have been made or fraud has been  committed. f. Defenses to Negligence 1) The accountant was not negligent. 2) The   accountant’s   negligence,   if  any,   was  not   the   proximate   cause   of  the  client’s loss. 3) The client was also negligent.
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2. Attorney’s Duty of Care a. General Duty All attorneys owe a duty to provide competent and diligent representation. The  standard is that of a reasonably competent general practitioner of ordinary skill,  experience, and capacity. b. Specific Responsibilities Attorneys must be familiar with well-settled principles of law applicable to a  case, discover law that can be found through a reasonable amount of research,  and investigate and discover facts that could materially affect the client’s legal  rights.
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  • Spring '08
  • Staff
  • Business Law, Accountant, U.S. Securities and Exchange Commission, Securities regulation in the United States, Private Securities Litigation Reform Act, Securities Exchange Act of 1934, Securities Act of 1933

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Chapter 34 Outline - 51ppt - CHAPTER 34 OUTLINE I POTENTIAL...

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