[wjsniper824]

Hi All, I am trying to figure out whether “Reliance” needs to be proved by plaintiff. Following 3 questions are from Ninja MCQ.

Beckler & Associates, CPAs, audited and gave an unmodified opinion on the financial statements of Queen Co. The Financial statements contained misstatements that resulted in a material overstatement of Queen’s net worth. Queen provided the audited financial statements to Mac Bank in connection with a loan made by Mac to Queen. Beckler knew that the financial statements would be provided to Mac. Queen defaulted on the loan. Mac sued Beckler to recover for its losses associated with Queen’s default. Which of the following must Mac prove in order to recover?

I. Beckler was negligent in conducting audit.
II. Mac relied on the financial statements.

Answer is both. So Reliance needs to be proved.

Which of the following facts must be proven for a plaintiff in a common law negligent misrepresentation action?
A. The defendant made the misrepresentations with a reckless disregard for the truth.
B. The plaintiff justifiably relied on the misrepresentations.
C. The misrepresentations were in writing.
D. The misrepresentations concerned opinion.

Answer is B. So Reliance needs to be proved.

A client suing a CPA for negligence must prove each of the following factors except

A Breach of duty of care
B Proximate cause
C Reliance
D Injury

Answer is C. Now reliance doesn’t need to be proved.

Am I missing something?

[CH89]

It's been awhile since I've studied the material, but I think the keyword here between these questions is “misrepresentation.” Reliance is not an element that must be proved for negligence, but it is for negligent misrepresentation.

Questions like these can get tricky, which is why it is important to read it very carefully. Crazy how omission of one word changes the question entirely!

[Author]

Replies