BLTC-9e Sample Answer for End-of-Chapter Hypothetical Question with Sample Answer Chapter 42: Liability of Accountants and Other Professionals 42–2 Hypothetical Question with Sample Answer The accounting firm of Goldman, Walters, Johnson & Co. prepared financial statements for Lucy’s Fashions, Inc. After reviewing the various financial statements, Happydays State Bank agreed to loan Lucy’s Fashions $35,000 for expansion. When Lucy’s Fashions declared bankruptcy under Chapter 11 six months later, Happydays State Bank promptly filed an action against Goldman, Walters, Johnson & Co., alleging negligent preparation of financial statements. Assuming that the court has abandoned the Ultramares approach, what is the result? What are the policy reasons for holding accountants liable to third parties with whom they are not in privity? Sample Answer: Assuming that the circuit court has abandoned the Ultramares rule, it is likely that the accounting firm of Goldman, Walters, Johnson & Co. will be held liable to
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This note was uploaded on 11/13/2011 for the course ECON 101 taught by Professor Professor during the Spring '11 term at NJIT.