Academic journal article Journal of Accountancy

Malpractice Allegation

Academic journal article Journal of Accountancy

Malpractice Allegation

Article excerpt

A Massachusetts superior court ruled that a complaint for accounting malpractice must allege "with clarity and certainty specific facts" for the court to allow the matter to go forward. Plaintiffs basically have to meet certain standards before proceeding with a malpractice case against a firm.

Cambridge Biotech Corp. hired Deloitte & Touche as its independent auditor for 1991 and 1992. The firm conducted audits and issued its reports dated March 6, 1992, and March 19, 1993. Each year, Cambridge had included these reports in its 10-k report filed with the Securities and Exchange Commission. On March 19, 1996, Cambridge brought suit alleging the firm had failed to conduct its audit in accordance with generally accepted auditing standards, resulting in revenue overstatement for 1991 and 1992. The firm said Cambridge's claim arising from the 1992 report was barred by the three-year statute-of-limitations period and moved for a dismissal for this and other reasons.

The court refused to grant the firm's motion to dismiss on statute-of-limitations grounds because it had continued to represent Cambridge after the 1992 report. However, the court did say that a complaint for accounting malpractice must contain the following elements to be sustainable: (1) The negligent acts or omissions of the defendants; (2) the content of the auditors' reports and certificates; (3) the work the defendants had agreed to do, had stated they had done or omitted and had actually done; (4) the extent to which the defendants' representations were qualified, contained disclaimers or expressed as opinions; (5) the generally accepted accounting principles the defendants were alleged to have violated; (6) the facts misrepresented and what the plaintiffs alleged the defendants knew, or after reasonable investigation should have known, concerning them. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.