An entity not in privity with an accountant is prohibited from recovering against the accountant for malpractice when the accountant had no knowledge of any use that could affect the party.

Question

Quizplus · Accepted Answer

This statement is a correct representation of the general rule in the law of accountant malpractice. A third party who is not in privity of contract with an accountant cannot hold the accountant liable for professional negligence unless the accountant knew or had reason to know about the third party's specific reliance on the accountant's work product. This rule helps to limit the accountant's liability exposure and to provide a clear boundary between the accountant's duty to the client and any incidental duties to third parties.

An Entity Not in Privity with an Accountant Is Prohibited