A regional CPA firm has 10 office locations in the New England area. The offices require regular maintenance to maintain a neat and professional appearance. During the past 5 years the CPA firm has used only Mr. Wright to perform the required maintenance. Mr. Wright is self employed and is paid on an hourly basis based upon invoices submitted to the CPA firm. Mr. Wright maintains a business office at his home and uses only his own tools while working and spends approximately 50% of his time working at the various CPA office locations.

Recently, Mr. Wright was demolishing an old building using dynamite to make way for a new building at one of the CPA office locations. During the blasting activity an unrelated 3rd Party was severely injured. The 3rd Party sued both the CPA firm and Mr. Wright for monetary damages under the Law of Agency. The CPA firm raised the defense that Mr. Wright was an Independent Contractor.

Required: 

• Explain in detail what the court will consider in making their decision on the CPA firms defense. 

• Will the CPA firm be held liable ?

• Will Mr. Wright be held liable ?

Question :

The shareholders of Enrot Corporation lost their entire investment when Enrot filed for bankruptcy. Enrot had no assets remaining after creditors had been paid. The shareholders sued and were awarded a $10,000,000 court judgement for negligence against the CPA general partnership which audited the financial statements of Enrot.

Addition facts;

The CPA partnership has an insurance policy which covers the negligent acts of the CPA's. in the amount of $5,000,000.

The net assets of the CPA partnership amount to $2,000,000.

The net assets of the partners are as follows;

Partner Net Assets

   A        $    100,000

   B        $ 2,000,000

   C        $ 4,000,000

Total    $ 6,100,000

Required:

Make a detailed, step-by-step, chronological plan for the shareholders (your clients) for the full collection of their $10,000,000 judgement.