When courts find accountants liable for constructive fraud, the implication is that:
A) Auditors should always be liable when investors lose money due to deceit
B) Accountants may be liable for fraud even when they had no knowledge of deceit
C) Auditors should be able to detect all deceit by management
D) Accountants may be held liable even to third parties to whom they did not have a duty

Question

Quizplus · Accepted Answer

When courts find accountants liable for constructive fraud, they are implying that the accountant may be liable for fraud even when they had no knowledge of deceit. This means that the accountant should have been aware of the possibility of fraud and taken steps to prevent it, even if they did not actively participate in the deceit. The court may hold the accountant liable for damages to third parties, even if they did not have a duty to those parties. Therefore, option B is the correct answer.

When Courts Find Accountants Liable for Constructive Fraud, the Implication