1) Niles, an accountant, certifies several audit reports on Optimal Operational
ID: 2711374 • Letter: 1
Question
1) Niles, an accountant, certifies several audit reports on Optimal Operational Processes, Inc., Niles’s client, knowing that the company intends to use the reports to borrow money from Prime Business Lending Company to buy new equipment. Niles believes that the reports are true and does not intend to deceive Prime Business, but does not check the reports before certifying them. Can Niles be held liable to Prime Business?
2) On May 1, Bobbi-Ann, a real estate agent, and Corporate Properties, Inc., a commercial property owner, sign an agreement about the sale of Corporate Properties’ office building. Under the terms, if a buyer makes a serious offer within sixty days, Corporate Properties must pay Bobbi-Ann’s commission. Bobbi-Ann puts for sale signs on the building, places ads in real estate pamphlets and one a locally focused Web site, and features the property in a “walking” tour online. On June 1, Corporate Properties tells Bobbi-Ann that it is canceling their arrangement. Ten days later, Corporate Properties closes a sale on the building without Bobbi-Ann’s participation. Bobbi-Ann files a suit against Corporate Properties for the amount of her commission. In whose favor is the court likely to rule, and why?
Explanation / Answer
1.
Yes, Niles can be held liable to prime business.
It is the legal liability and accountability of accountant who certifies audit report with due diligence. These certified reports work as a basis not only for the client but also for the third parties. These third parties include investors, lending firms and other stakeholders. Thus, any negligence followed by the accountants can put them in legal cases by third parties.
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