Assignments Of Business Laws

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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Introduction
The concept of professional negligence is a branch of the general principles of negligence.
Under this area of tort law, the duty of care that has been imposed upon the alleged is owing
to the abilities and position he has been holding by virtue of his profession and any
discrepancy in his activities inflicting carelessness resulting in causing injury to a person
having proximate relation with his profession would be held liable for negligence.
Professional negligence includes negligent actions of professional in the area including
medicine, law, accounting and other similar areas where the activities of the professionals are
inflicting a probability upon the interests of the related person (Anderson 2017). This essay
would present a discussion regarding the significance of negligence in the accounting
profession.
Discussion
The accounting profession includes the professionals who are conferred with the authority
to deal with the financial affairs of the client and has to bear stringent responsibilities while
conducting their duties to ensure accuracy and standard. The client who has been entrusting
the accountant with their financial information has an immense confidence over the skills and
capabilities of the accountant. However, there are situation where the accountant are
negligent in ensuring the standard of care to be exhibited in their activities that causes
considerable amount of distress and loss to the client who has immense faith upon the
accountant with respect to the proper accounting of his financial information (Patten and
Saunders 2018).
There were several instances where the accountants are to be held liable for the inaccurate
and erroneous activities they have resorted to resulting in a huge volume of losses being

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caused to the clients. This can be treated as negligence as per the outcome that will be arrived
at by applying the principles of negligence upon the same. Negligence is said to have been
committed when a person who has been accrued with certain obligation to maintain
carefulness and has failed to abide by that obligation by being careless which has caused
immense loss to the person who has been holding a connection with the alleged person
proximate enough to be affected by such an infliction of carelessness. The best example of
the tort of negligence can be found in the case of Donoghue v Stevenson [1932] UKHL 100.
Moreover, as per the principles established in the case of Caparo Industries PLC v Dickman
[1990] UKHL 2, four elements of negligence can be namely the existence of a duty to be
careful, the contravention of that duty, the proximity of the person claiming for remedy to the
negligent person and the injury caused to the aggrieved (Becher 2018).
These principles relating to the negligence can be applied to the instances of professional
negligence. In such a case, the accountants conferred with the power to deal with the
financial information of their clients. This confers certain duties and responsibilities upon the
accountants to exhibit care in diligence while performing their duties as an accounting
professional. This is because the financial resources of the clients are to be affected by the
actions of the accountants. In case erroneous financial reports and disclosures made by the
accountants while performing his duties, the business and the person interested in the same
has the probability of being affected by such a lack of care being exhibited by the
accountants, which has the probability of causing injury to the them (Laing and Hoy 2018).
The example of such an act of negligence involving the accounting profession can be
found in the case of Boyd v Ackley (1982) 32 D.L.R. (2d) 77. In this case, a claim relating to
professional negligence has been brought against accountants. The aggrieved, in this case,
has made a misstatement in their financial reports belonging to the company of the plaintiffs,
which made the plaintiffs to make an overpayment of a debt. Eventually, the company has

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been sold by the plaintiffs and all the debts of the same have been assumed by the plaintiffs.
Consequent to this, the accountants claimed the plaintiffs to be not authorised to pursue such
a claim as the company has been sold to another person. However, it has been held by the
court that as the payment of the debt has been made by the plaintiff, the negligent acts of the
accountants has been proximate enough to cause injury to the plaintiff. And hence, the
accountants have been held liable for the same (www.awbrisbanelawyers, 2019).
However, as per the provisions established in the case of Spartan Steel & Alloys Ltd v
Martin [1972] 3 WLR 502, pure economic loss is not actionable in case of negligence. Again,
the same has been contradicted by the principle evolving from the case of Hedley Byrne &
Co v Heller [1963] 3 WLR 101, where it has been held that any injury of financial nature
would be actionable under the laws of negligence, if it has been caused by the negligent
misstatement. Another instance of the negligence among the accountants has been found in
the case of Cam & Bear Pty Ltd v McGoldrick [2018] NSWCA 110, where the auditors are
in contravention of their liability to qualify audit reports relating to certain funds of an
unsecured loan (Backof 2015).
Conclusion
Hence, it can be concluded that the accountants are to be held liable for any negligence
actions they exhibit while providing financial assistance to a client. This involves the
financial conduct and resources of the client and requires a considerable amount of
carefulness to be exhibited by the accounting professionals. Any discrepancy in the same
would not only cause injury to the person whose financial resources the professional has been
dealing with but also the others who have been involved in the same. This includes creditors,
investors and other similar individuals whose has been expected to be affected by the conduct

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of the accounting professionals involved. Hence, even if it comes under purview of pure
economic loss, the same would not permit the accounting professionals to evade liability.
Reference
Anderson, M., 2017. Accounting history publications 2016. Accounting History Review,
27(3), pp.279-286.
Backof, A.G., 2015. The impact of audit evidence documentation on jurors' negligence
verdicts and damage awards. The Accounting Review, 90(6), pp.2177-2204.
Becher, T., 2018. Professional practices: Commitment and capability in a changing
environment. Routledge.
Boyd v Ackley (1982) 32 D.L.R. (2d) 77
Cam & Bear Pty Ltd v McGoldrick [2018] NSWCA 110
Caparo Industries PLC v Dickman [1990] UKHL 2
Donoghue v Stevenson [1932] UKHL 100
Hedley Byrne & Co v Heller [1963] 3 WLR 101
Laing, G.K. and Hoy, S., 2018. A Retrospective of Professional Liability of Auditors in
Australia. Journal of New Business Ideas & Trends, 16(1).
Patten, B. and Saunders, H., 2018. Professional negligence in construction. Routledge.
Spartan Steel & Alloys Ltd v Martin [1972] 3 WLR 502
www.awbrisbanelawyers (2019). Professional Negligence - Accountants Held Liable For
Breach Of Duty To Previous Shareholders Of Company - Law Article. [online]

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Awbrisbanelawyers.com.au. Available at:
http://www.awbrisbanelawyers.com.au/accountants-held-liable-breach-of-duty-to-previous-
shareholders-company-solicitors-brisbane.html [Accessed 20 Aug. 2019].