Finola, a certified public accountant, provides accounting serv¬ices to Global Trade Corporation. The services include preparing Global Trade's financial re-ports and issuing opinion letters based on the reports. In 2014, Global Trade falls into

Question

serious financial trouble, but neither Finola'sreports nor her opinion let¬ters indicate this situation. Relying on Finola'sportrayal of Global Trade's finan¬cial situation, the firm borrows a large sum of money to build a new ship-ping facility. In lending Global Trade the money, Harbor City Bank relies on Finola'sopinion letter. Finolais aware of this reliance. If Finoladid not en¬gage in intentional fraud but was negligent, what is her potential liability?

Answer 1

Regarding the accountant's potential liability to the bank, most courts would hold her liable for negligence, but the standard for im¬posing this liability varies.
There are three different views. The tradi¬tional rule (the Ultramares rule) states that accountants owe a duty of care only to those persons for whose primary benefit the accountant pre¬pares reports or issues opinion letters. In the absence of privity, a party could not recover from an accoun¬tant. Under that rule, the accountant in this problem would not be held liable to the bank.
Under a slight modification of this rule, some courts hold that if a third party has a suf¬ficiently close relationship or nexus (link or connection) with an ac¬count¬ant, then the privity requirement may be satisfied without estab¬lishing an accountant-client relation¬ship. Under this modification, the accountant would be held liable because he knew that the bank relied on her letter.
The majority of courts have adopted the position taken by Section 552 of the Restatement (Second) of Torts, under which an ac¬countant's liability ex-tends to persons for whose benefit the accountant "intends to supply the information or knows that the re¬cipient intends to supply it" and to those persons whom the accountant "intends the in¬formation to influence or knows that the recipient so intends.". Under this rule, the ac¬countant will be held liable to the bank for negligent misstatements or omissions, be¬cause he knew that the bank was relying on her work product when de¬cid¬ing whether to make the loan.
A few other courts hold accountants li¬able to any users whose reliance on an ac¬countant's statements or reports is reasonably foreseeable. Of course, under this stan¬dard the accountant in the hypothetical would clearly be held liable.