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Given the close balance of the equities in a time of complete defenses, it is unsurprising to find a split of authority on the issue of where the risk of loss should fall -- on the negligent client or the negligent auditor. In Shapiro v. Glekel,(n178) the court was apparently persuaded by the need for reinforcing public faith in financial information by choosing to apply the National Surety rule as controlling New York state law.(n179)

The case cited most often as following the Craig rule is Delmar Vineyard v. Timmons(n180) which held, quoting Craig, that a client cannot "'recover for losses which they could have avoided by the exercise of reasonable care.'"(n181) One commentator observes that Delmar Vineyard should have been decided for the accountants on the ground that their negligence was not a proximate cause (actually, not a cause-in-fact) of the client's loss; the loss would have occurred even if the accountants had fully performed.(n182) Nevertheless, based on its citation to Craig, had the accountant's sloppiness been material to the loss, the Delmar Vineyard court apparently would have absolved the accountants from liability by recognizing the client's own contributory negligence.

Section 552A of the Restatement (Second) of Torts recognizes the defense of contributory negligence in instances where the client unreasonably relies on the financial reports.(n183) For example, if the client knows that the auditor uses sampling techniques that may fail to detect a certain kind of fraud, yet, relying entirely on the audit, the client takes action assuming absolutely that this type of fraud has not occurred, the client could be held contributorily negligent; in such an instance the client's total reliance on the audit opinion would be unreasonable. One writer states that the Restatement's explicit recognition of unreasonable reliance as a ground for contributory negligence precludes other grounds such as the client's negligently "managing his business in a way that enables employee fraud to occur."(n184) That implied exclusivity is not at all clear, however.(n185)

We would argue that policy considerations favoring the compelling importance of accurate financial reporting have come to outweigh policies protecting the viability of the accounting profession. These policy considerations mandating better information for the benefit of investors, creditors, and taxpayers (where government is a guarantor)(n186) would dictate, however, that management not be allowed to shift its losses resulting proximately from its own laxness entirely to providers of attestation services.(n187) Presumably all the major actors in producing financial information should feel appropriate pressures to acquire and disseminate accurate data. The demand for better financial information requires a deterrent that punishes insufficient vigilance on the part of any and all parties capable of preventing pecuniary harm to third parties resulting from erroneous financial statements. Thus, when harm does occur, damages should be apportioned so that suitable precautions will be taken in the future by all those providing information important to the public.

Comparative Fault When There are Multiple Defendants

In Lincoln Grain, Inc. v. Coopers & Lybrand,(n188) the court reviewed the earlier cases dealing with the contributory negligence defense and opted to follow the National Surety and Shapiro precedents (which greatly limited the defense for auditors), rather than the unlimited rule of


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