Three's a crowd: An examination of state statutes and court decisions that narrow accountant liability to third parties for negligence
The last 30 years have witnessed a surge in litigation against public accounting firms. Accounting firms and the profession itself have taken a proactive stance to mitigate the effects of litigation. One step taken has been to mount a campaign aimed at legal reform that would level the playing field upon which liability claims are resolved. Despite the passage of recent federal reform legislation, however, accountants have continued to confront significant liability from cases based on state tort theories, especially negligence. The positive signal for accountants, however, is that a trend has emerged at the state level, both legislatively and judicially, toward a narrower scope of accountant liability to nonclients for negligence. This article outlines and analyzes state court decisions and statutes that have slowed or reversed the expansion of accountant liability to third parties for negligence. Also, this trend is examined in light of the varying legal standards used by the states in determining which third parties have a right to sue accountants for negligent misrepresentation.
Pacini, C., Hillison, W. &, Sinason, D. (2000). Three's a crowd: An examination of state statutes and court decisions that narrow accountant liability to third parties for negligence. Advances in Accounting 17,151-185.
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