Printer Friendly

Appellate court disallows evidence of client's negligence.

The U.S. Court of Appeals for the Eighth Circuit ruled evidence of a client's own negligence in failing to detect and prevent an embezzlement was inadmissible as a defense by the client's editors.

KPMG Peat Marwick was sued by Garnac Grain Co., Inc., after Garnac discovered an employee embezzled approximately $3.4 million from the company over a six-year period in which Peat had been Garnac's auditors. Garnac charged the auditors failed to comply with generally accepted accounting standards and alleged this failure precluded it from discovering and preventing the embezzlement.

In its defense, Peat sought to present evidence of Garnac's own negligence, which it claimed had led to the embezzlement.

Despite a Missouri Supreme Court ruling that "insofar as possible . . . cases shall apply the doctrine of pure comparative fault," the appellate court refused to apply this standard in this instance, distinguishing cases involving economic harm from cases of injury or death to person or property. In cases involving purely economic harm, as in this case, comparative fault principles were held not to apply, and the defendant accounting firm was precluded from presenting evidence of the client's fault. (Garnac Grain Co. Inc. v. Blackley, 932 F.2d 1562)
COPYRIGHT 1992 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Author:Baliga, Wayne J.
Publication:Journal of Accountancy
Article Type:Brief Article
Date:Feb 1, 1992
Previous Article:Auditor not responsible for client's 'deepening insolvency.' (Brief Article)
Next Article:New York court declines jurisdiction over Virginia accountant.

Related Articles
Florida reverses privity ruling.
Client not "contributorily negligent" in relying on accountant's skill.
Accountants liability for purely economic loss.
Court rules Bily decision is retroactive.
Client can recover purely economic damages in negligence case.
Legal malpractice in the 21st century.
Appellate court sustains breach-of-contract action.
Third parties can rely on auditor's work.
Victory for CPAs in litigation services.
Colorado says OSHA violations admissible in lawsuit.

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters