Ailing company's liabilities exceed its assets. Ailing hires Brad, an accountant, to entity balance sheet showing a positive net worth. Credit Bank relies on the balance sheet to under the Ultramares rule to Ailing. The firm defaults on the loan. Under the Ultramares rule, Brad is most likely not liable because he
A. Finished his work before Ailing’s loan and default
B. is not responsible for his client’s finances
c. did not owe a duty of care to any third party
d. was not in privity with the bank
Answer: d
This rule indicates that an accountant should produce accounts in utmost care and good faith. In the process of doing so the accountant must have privity with the party or must have a close relation, which is the company. Since there is no privity with the bank or doesn’t have any close relation, the accountant should not be liable for such default.
Ailing company's liabilities exceed its assets. Ailing hires Brad, an accountant, to entity balance sheet showing...
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