The leading precedent-setting case in third-party liability was a 1931 U.S.case,Ultramares v.Touche.What is the key aspect of this case?
A)To succeed,claimants must be foreseeable users of the audited financial statements that are part of the claim process.
B)Ordinary negligence is insufficient for liability to third parties because of lack of privity of contract.
C)The auditor must have actual knowledge of the users of the financial statements to establish privity.
D)There is no general auditor liability to shareholders,since the loss of equity was suffered by the company.

Question

Quizplus · Accepted Answer

The key aspect of the Ultramares v.Touche case was that ordinary negligence was insufficient for liability to third parties because of lack of privity of contract. The court established that in order for a third party to recover from an auditor, there must be privity of contract or a relationship so close to approach that of privity. This case established a high standard for third-party liability for auditors.

The Leading Precedent-Setting Case in Third-Party Liability Was a 1931