Accountant’s Liability to Third Parties – Florida Accounting Negligence Litigation and Arbitration Attorney – Russell L. Forkey, Esq.
WHEN AN ACCOUNTANT FAILS TO EXERCISE REASONABLE AND ORDINARY CARE IN PREPARING THE FINANCIAL STATEMENTS OF HIS CLIENT AND WHERE THAT ACCOUNTANT PERSONALLY DELIVERS AND PRESENTS THE STATEMENTS TO A THIRD PARTY TO INDUCE THAT THIRD PARTY TO LOAN TO OR INVEST IN THE CLIENT, KNOWING THAT THE STATEMENTS WILL BE RELIED UPON BY THE THIRD PARTY IN LOANING TO OR INVESTING IN THE CLIENT, IS THE ACCOUNTANT LIABLE TO THE THIRD PARTY IN NEGLIGENCE FOR THE DAMAGES THE THIRD PARTY SUFFERS AS A RESULT OF THE ACCOUNTANT’S FAILURE TO USE REASONABLE AND ORDINARY CARE IN PREPARING THE FINANCIAL STATEMENTS, DESPITE A LACK OF PRIVITY BETWEEN THE ACCOUNTANT AND THE THIRD PARTY?
The Florida Supreme Court answered this question in the affirmative in the case of First Florida Bank, N.A. v. Max Mitchell & Co., 558 So. 2d 9 (Fla. 1990). In this matter, the court provided two examples to illustrate this circumstance.
(1): The court held that the Restatement (Second) of Tort § 552 governing information negligently supplied for the guidance of others has been adopted to apply to accountants so that when an accountant fails to exercise reasonable and ordinary care in preparing financial statements of the client and accountant personally delivers and presents statements to third party to induce that third party to loan or invest in client, knowing that statements will be relied upon by third party in loaning to or investing in client, accountant is liable to third party in negligence for damages third party suffers as a result of accountant’s failure to use reasonable and ordinary care in preparing financial statements, despite lack of privity (direct relationship) between accountant and third party.
(2): Accountant, who prepared audits without knowing they would be used to induce reliance of bank to approve line of credit for client, but who actually negotiated loan on behalf of client and personally delivered financial statements to bank with knowledge that it would rely upon them in considering to make loan, was liable to bank in negligence for damages bank suffered as a result of accountant’s failure to use reasonable and ordinary care in preparing financial statements, despite lack of privity.
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At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.