Opinion ID: 2226595
Heading Depth: 1
Heading Rank: 15

Heading: Failure to Discover Missing Westinghouse Payable

Text: There was considerable evidence offered at trial that Coopers & Lybrand failed to find the missing Westinghouse payable on World Radio's financial statements. In fact, as noted above, Coopers & Lybrand does not dispute the jury's finding of negligence. What Coopers & Lybrand does dispute, however, is whether its failure to detect the missing payable caused the damage alleged by World Radio. According to Coopers & Lybrand, it was the existence of the $890,111 account payable to Westinghouse that created financial difficulties for World Radio and not the discovery of it. In Coopers & Lybrand's view, the failure to detect the payable actually helped World Radio because it overstated World Radio's actual financial position by the amount of the payable, thereby enabling World Radio to receive credit it would not otherwise have been able to get. Coopers & Lybrand asserts that the failure to discover the missing Westinghouse payable in 1984, at most, delayed the adverse consequences of being indebted in the amount of $890,111. Coopers & Lybrand therefore contends that World Radio failed, as a matter of law, to establish the required element of proximate causation. Coopers & Lybrand is correct in asserting that it was not responsible for the creation of the Westinghouse payable. This fact alone, however, does not mean that the failure to find the payable did not cause World Radio damage. At trial, Meyerson specifically testified that World Radio made decisions all the time based on what we believed to be accurate financial statements. Furthermore, the evidence offered at trial shows that World Radio continued to expand and incur more debt in 1984 and 1985 believing its financial status was sound, as reported by the incorrect financial statements. Meyerson also testified that had Coopers & Lybrand discovered the missing payable earlier and relayed this information to World Radio, World Radio would have immediately made any changes necessary in its internal accounting controls. This evidence was sufficient to allow the jury to conclude that World Radio's reliance on the incorrect financial statements prepared by Coopers & Lybrand caused World Radio to make business decisions it might not otherwise have made, thereby causing financial damage in the form of lost profits and a loss in the value of the company. For this reason, whether Coopers & Lybrand's incorrect auditing practices caused World Radio financial harm damage was a factual question for the jury. See Lincoln Grain v. Coopers & Lybrand, 216 Neb. 433, 345 N.W.2d 300 (1984).