Negligent Misrepresentation

Negligent misrepresentation occurs when an accountant gives false information to a third party with respect to financial statement information.

A liability exists when the accountant knows the person who will rely on the statement and knows the purpose of relying.

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Auditor liability for negligent misrepresentation does not require proof of the audit that was intended to influence the particular plaintiff.

A complaint for negligent misrepresentation is sufficient if it alleges the audit was intended to influence the particular classes of person to which the plaintiff belongs.


Accountants’ Liability for Negligence and Recklessness

  Negligence refers to the failure to take proper and reasonable care, causing injury or loss to another person   Recklessness is the state of mind where a person deliberately pursues a course of action while consciously disregarding any risks stemming from such action
  An individual not aware of the risk involved, but should have known what risks are   An individual is aware of the risk involved
  Carries a lesser liability than recklessness   Carries a greater liability than negligence