No duty to continually update audit report.Eighteen of 18,00 investors who held thrift certificates or subordinate debentures in the defunct MorAmerica Financial Corporation brought suit against its auditor, McGladrey, Hendrickson & Pullen (MHP MHP Multimedia Home Platform (consumer electronics) MHP Milliyetci Hareket Partisi (Turkish: National People's Party) MHP Mobile Home Park (district) MHP Maximum Human Performance ). MHP issued an audit report for MorAmerica in December 1983 for the fiscal year ended September 30, 1983. MorAmerica filed for bankruptcy in August 1985. The investors alleged MHP made fraudulent, negligent and innocent misrepresentations because the accounting firm did not alert state officials that MorAmerica's financial condition had deteriorated after its 1983 audit. The district court dismissed the suit for failure to state a claim Within a judicial forum, the failure to present sufficient facts which, if taken as true, would indicate that any violation of law occurred or that the claimant is entitled to a legal remedy. Failure to state a claim is frequently raised as a defense in civil litigation. on which any relief could be granted. The appellate court A court having jurisdiction to review decisions of a trial-level or other lower court. An unsuccessful party in a lawsuit must file an appeal with an appellate court in order to have the decision reviewed. affirmed this decision, rejecting the argument that MHP had a continuing duty to update its 1983 audit. MHP was not a guarantor guarantor n. a person or entity that agrees to be responsible for another's debt or performance under a contract, if the other fails to pay or perform. (See: guarantee) GUARANTOR, contracts. He who makes a guaranty. 2. of the financial statements and did not vouch for vouch for verb 1. guarantee, back, certify, answer for, swear to, stick up for (informal) stand witness, give assurance of, asseverate, go bail for verb 2. the achievability of any forecast of future results. Consequently, the accountants had no duty to update an audit report that was materially correct when made. The investors also contended that although they never saw or read MHP's report, they relied on state regulators who had allegedly relied on the report. But the court found the investors never requested and did not receive any assurances of MorAmerica's financial soundness from either MHP or state regulators. Therefore, their alleged reliance was too weak to support a claim against MHP. |
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