Court Opinion

ID: 5869303
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:42:46.246315+00
Date Added: 2024-06-11T08:44:39.860972
License: Public Domain

Ross, J., concurs in a memorandum as follows:
I agree that the complaint should be reinstated. It is undisputed that the defendants’ accounting firm directly made representations to plaintiff bank as to the soundness of the inventory and accounts receivable of defendants’ client Majestic Electro (Majestic), and, as a result of these representations, plaintiff extended approximately three million dollars in credit to Majestic. In view of the fact that defendants were aware that plaintiff was relying on their audit, the plaintiff was “entitled to a duty of care from defendants]” (Credit Alliance Corp. v Andersen & Co., 101 AD2d 231, 235-236). 11 The public responsibility of accountants has expanded dramatically. While 50 or more years ago accountant’s audits were primarily used to inform clients of the financial heálth of their businesses, today it is assumed, as a matter of course, that accountant’s audits will be used and relied upon, not only by clients but also by third parties, such as the investing public and lenders, with whom the accountants have no employment relationship. Recognizing this fundamental change in the role of accountants, a unanimous United States Supreme Court in United States v Young & Co. (465 US _, _, 104 S Ct 1495, 1503), ruled that: “By certifying the public reports that collectively depict a corporation’s financial status, the independent auditor assumes a public responsibility transcending any employment relationship with the client. The independent public accountant performing this special function owes ultimate allegiance to the corporation’s creditors and stockholders, as well as to [the] investing public. This ‘public watchdog’ functions demands that the accountant maintain total independence from the client at all times and requires complete fidelity to the public trust.” (Material in italics in text, material in brackets added.)