Which of the following statements is true of accountants' liability to clients in breach of contract suits?
A) Courts consider damages to include expenses incurred by the client in securing another accountant to perform the needed services.
B) Courts usually award punitive damages if the auditor provides a disclaimer of opinion after auditing clients' financial statements.
C) An accountant who fails to perform the terms specified in an engagement can be sued for damages only if the accountant displayed reckless regard.
D) Penalties incurred by the client for missed deadlines or lost opportunities are not considered by courts while awarding damages.

Question

Quizplus · Accepted Answer

Courts consider damages to include expenses incurred by the client in securing another accountant to perform the needed services. This is known as the "cost of cure" measure of damages and is a common form of compensation in breach of contract suits against accountants. Punitive damages are not usually awarded in such suits unless the accountant's conduct was particularly egregious, and penalties incurred by the client for missed deadlines or lost opportunities may also be considered as part of the damages award. The accountant's liability does not depend on a showing of reckless disregard, but rather on a failure to perform the terms of the engagement contract.

Which of the Following Statements Is True of Accountants' Liability