Ron is an accountant who was contacted by Zebra Toy Company to prepare financial statements. Zebra Toy Company told Ron that it wished to present these documents to Lion Wholesalers, Inc., a large supplier of toys. If Lion is convinced that Zebra Toy Company is financially solid, it will issue Zebra a large line of credit. ? After Ron prepares the financial documents, Zebra presents the information to Lion Wholesalers and also to Tiger Toy Company, another wholesaler of toys. Zebra wishes to obtain a line of credit from Tiger as well as from Lion. If Ron committed a serious error by overstating Zebra Toy Company's financial soundness and the two creditors, Lion and Tiger, are damaged as a result, can these third parties recover damages from Ron? Explain.

Question

What will be an ideal response?

Answer 1

The answer depends on what rule the state follows in determining an accountant's liability for negligence to third parties.?Under the Restatement Doctrine both creditors can recover. Under this doctrine a third party can recover if it can prove the accountant failed to use due care and if the creditor was either (1) a party the accountant knew would rely on this information or (2) a party in the same class who relied on the information. Lion was a known third party and Tiger was in the same class, a potential creditor of Zebra Toy.?Under the Ultramares Doctrine, Ron is liable to Lion, a known third party. Tiger could not collect under this doctrine since its identity was not known to Ron.??Under the Foreseeable Doctrine, Ron is also liable to both Lion and Tiger since both Lion and Tiger were foreseeable parties who would use Ron's information.?