The Accountant/Attorney Liability Reporter: October 2009
Inside this Issue
The Basics of Accountant Malpractice: Things Every Accountant Should Know
By Douglas M. Marrano, Esq.
Issues involving accounting and accountants have been splashed across the front pages of newspapers for the better part of the last 18 months. It is hard to say whether approaching changes to laws concerning accountants and reporting requirements would have prevented the economic downturn. What is not likely to change, however, are the basic requirements for suing an accountant for professional malpractice. Knowing these conditions will help accountants avoid potential traps in their practices and what to expect should they be sued.
The Importance of Engagement Letters
By Brian C. Newberry, Esq.
Avoiding malpractice claims can begin with the drafting and enforcement of appropriate engagement letters. Properly used, engagement letters limit the scope of representation, define the terms and set out a schedule of fees and payment. In addition, particularly when dealing with small business owners who may have multiple similarly named entities, defining the parties to the engagement is also critical so as not to cause confusion down the road.
State Law Determines Whether Third-Party Suit Against Auditor Survives
By Justin M. Jagher, Esq.
Harco National Insurance Company v. Grant Thornton LLP, a recent unpublished decision (2009 WL 1065405), is a case that focused on the differences in state laws for third-party suits against auditors and how the applicable state law can determine whether the suit proceeds or is dismissed. The Superior Court of North Carolina, Wake County (“Court”), discussed Illinois, Pennsylvania and North Carolina law regarding whether a third-party can sue an auditor. The case displays the importance of understanding the state laws in which an accountant will perform an audit, which can determine to whom it might be liable to in the future.
Continuous Representation Doctrine in New York
Service professionals often face the difficult task of distinguishing when representation begins and when representation ends. The easy answer would seem to be that representation begins with an engagement letter and ends when the scope of representation under that letter terminates. The answer, however, is not always crystal clear.
Agreement to Extend Time to Sue Upheld
By Michelle R. Epstein, Esq.
The First District Appellate Court for the State of Illinois recently determined when a tolling agreement can effectively extend the statute of limitations and repose for public accountants and found as a matter of first impression that the imputation defense is inapplicable to claims brought by the Illinois Division of Insurance.
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