A contractual obligation to the client that creates a privity relationship.
A client can bring a lawsuit against an accountant for failing to live up to terms of the contract; plaintiff must demonstrate:
Auditors breached contract.
Auditors failed to exercise appropriate level of professional care.
Auditors breach or failure of care caused the loss.
Fraud includes gross negligence or constructive fraud that represents an extreme or reckless departure from professional standards of care.
Ultramares v. Touche, 1933.
Third party not in contractual privity cannot sue based on negligence.
Left open possibility for gross negligence and fraud.
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