Niles, an accountant, certifies several audit reports on Optimal Operational Processes, Inc,Niles'sclient, knowing that the company intends to use the reports to borrow money from Prime Business Lending Company to buy new equipment. Nilesbelieves that
the reports are true and does not intend to deceive Prime Business, but does not check the re¬ports before certifying them. Can Nilesbe held liable to Prime Business?
Yes. In this situation, Nilesmay be liable on the ground of neg¬li-gent misrepresen¬tation.
Negligent misrepresentation occurs when a person misrepresents a material fact by failing to exer¬cise reasonable care in uncov¬ering or dis¬closing the facts, or by not using the skill and competence that his or her busi¬ness or profession requires. In ef¬fect, the negligence is given the same weight as scienter, or an intent to deceive, and the case is treated the same as a case involving fraudulent misrepresentation.
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