RSM423H1 Chapter Notes - Chapter 20: Contributory Negligence, London Assurance, Financial Statement
Document Summary
That there was a privity or beneficiary relationship. That the statements were the direct cause of the loss. That the accountant was negligent in performance of duties. Clients may bring a lawsuit for breach of contract. The relationship of direct involvement between parties to a contract is known as privity. When privity exists, the plaintiff usually need only show that the defendant was negligent. Third parties may file a lawsuit under the tort law of negligence. Negligence is failure to perform a duty with requisite standard care. There is a duty of care owed the plaintiff. There must be a breach in that duty. There must be a reasonably proximate connection between the breach of duty and the resulting damages. Owners cannot sue on behalf of the corporation. Stakeholders can only take action as third parties. Need to establish damages separate from the corporation. In the case of fraud or constructive fraud, the auditor is held liable to third parties.
