Case 6-4 Anjoorian et al.: Third-Party Liability

1. Analyze the potential for legal liability of P&T under each of the four basic theories of liabilities discussed in Chapter 6.

2. Were the auditors guilty of professional negligence? Explain.

3. Judge Silverstein relied on the Restatement (Second) of the Law of Torts for his ruling. Assume he had relied on the near-privity relationship ruling in Credit Alliance, and evaluate the legal liability of the auditors using that standard.

4. The defendants argued in the case that, in order to find a duty to third parties, an accountant must have contemplated a specific transaction for which the financial statement would be used and that no such transaction was contemplated here. Do you agree with this statements from the perspective of auditors third party liability? Why or why not?