Academic journal article Journal of Accountancy

Court Rules on Relevant Statute of Limitations

Academic journal article Journal of Accountancy

Court Rules on Relevant Statute of Limitations

Article excerpt

The Supreme Court of Michigan ruled that there is a two-year statute of limitations for cases accountants' malpractice.

Local 1064 of the AFL-CIO brought an action against Ernst & Young, claiming the firm had failed to detect that the union's bookkeepers had not prepared and submitted reports as required by the Michigan Employment Security Commission for 1984 through 1988. As a result, the commission assessed an increased contribution rate against Local 1064, which cost it more than $21,000.

The firm had provided services to the plaintiff during fiscal years 1984, 1985 and 1986. The union did not become aware of the bookkeepers' error until July 1988. The firm made a motion for summary judgment on the grounds that the two-year statute of limitations had expired. The trial court denied this motion, ruling that the relevant statute-of-limitations period was actually six years. The firm appealed and the appellate court upheld the trial court, ruling that the applicable statute-of-limitations period may be found in either the three-year residual tort statute, the six-year breach-of-contract statute or the six-year general statute of limitations. …

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