Horseco, a new business, purchased ten thoroughbred horses for racing and breeding purposes. It hired John, an accountant, to prepare financial projections of anticipated future earnings for the first five (5 ) years of the new business. The information
provided to John as the basis for the projections included assumptions made by Horseco about anticipated earnings from racing and breeding. The assumptions were based on Horseco's experience and were not based on objective standards that could be examined by John. John included with the projections a disclaimer that stated that the income projections were based on assumptions provided by Horseco and that John assumed no personal responsibility for the accuracy of those projections. Subsequently, the Larson Company purchased a fifty (50 ) percent interest in Horseco, and when Horseco's income did not match the projections, Larson sued John for accounting malpractice. How will the court decide?
Judgment will be for John. Disclaimers permit an accountant to limit or disclaim liability if, under the circumstances, it is unreasonable to expect the accountant to stand behind certain information and the disclaimers make it clear that the accountant does not vouch for the disclaimed information. In this case, the assumptions regarding future income could not be objectively verified by John, and it would therefore be unreasonable to subject John to liability when future earnings failed to meet Horseco's projections.
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