The standard of care applicable to the conduct of audits by public accountants is the same as that applied to doctors, lawyers, architects, engineers, and others furnishing skilled services for compensation, and that standard requires reasonable care and competence therein.[i] In Shook v. Lynch & Howard, 150 N.C. App. 185 (N.C. Ct. App. 2002), the court held that an accountant is liable for damages naturally and proximately resulting from his or her failure to use that degree of knowledge, skill, and judgment usually possessed by members of the profession in a particular locality. In such circumstances, a plaintiff should offer evidence of the proper standard of care by introducing affidavits of individuals experienced in accounting and familiar with the standard of care owed by an accountant.
The specific scope of an accountant’s duty to a client must be determined primarily by the terms and conditions of the contract of employment. The standards that govern an accountant in performing an audit are those set by the profession measured by GAAP and GAAS promulgated by the American Institute of Certified Public Accountants. In Midwest Imports v. Coval, 1994 U.S. Dist. LEXIS 17857 (N.D. Ill. Dec. 13, 1994), the court held that if the accountant complies, no liability arises in either contract or tort, except in the very unusual case where the accountant contracts to perform to a higher standard.
Public accountants owe to their employers: (1) a duty imposed by law to make, without fraud, their certificate that the balance sheet they prepared corresponds with the books, and, in their opinion, is a correct representation of financial condition; and (2) a duty growing out of contract to make it with the care and caution proper to their calling.
[i] John Martin Co. v. Morse/Diesel, Inc., 819 S.W.2d 428 (Tenn. 1991)