Do you agree with the assertion of AFS's legal counsel that Touche Ross would have violated the profession's client confidentiality
Do you agree with the assertion of AFS's legal counsel that Touche Ross would have violated the profession's client confidentiality rule by withdrawing its 1985 audit opinion and notifying all relevant third parties of that decision? Why or why not?
AFS filed for bankruptcy in April 1987. The company's president filed for personal bankruptcy approximately two years later. In early 1989, Chevron Chemical sued Touche Ross, alleging that the accounting firm negligently audited AFS's 1985 financial statements. Chevron Chemical also claimed that Touche Ross had a responsibility to notify it after learning of the error in AFS's 1985 financial statements.
A Wisconsin state court rejected the allegation that Touche Ross negligently audited AFS in 1985. However, the court ruled, and a Wisconsin state appellate court later agreed, that Touche Ross "was negligent as a matter of law in failing to notify plaintiff [Chevron Chemical] of the withdrawal of their opinion." The original state court awarded damages of $1.6 million to Chevron Chemical.
This problem has been solved!
Step by Step Answer: