Reviewed by Charles L Holley Virginia Commonwealth University
This book is a comprehensive treatment of case and statutory law applicable primarily to public accountants. The first chapter describes the public accountant’s liability for negligence, libel and fraud. The three remaining chapters involve the law relative to the public accountant’s certificate, the accountant as an expert witness and certain special rights of public accountants. Copyrighted in 1935 and reprinted in 1980, this reference contains 222 pages of narrative, an Appendix (AICPA Rules of Professional Conduct in 1935), a table of legal cases cited (5 pages), and a bibliography.
Chapter I (Liability of the Public Accountant for Negligence, Fraud and Libel) describes the development of laws relative to public ac-countancy according to the following main divisions:
I. Interest in the public accountant’s liability for negligence and fraud. II. Nature of negligence.
III. Liability of the public accountant to his client for negligence.
IV. Liability of the public accountant to his client for libel.
V. Liability of the public accountant to third parties for negligence and fraud.
VI. Extension of the ambit of negligence rather than that of fraud to cover the public accountant’s liability to third parties for innocent but negligent misrepresentation.
VII. Criminal liability of the public accountant for fraud.
There are extensive quotations from court cases to emphasize the most important issues. Chapter I alone contains 97 footnotes for legal sources, explanatory material, and supporting periodical articles. There are two hundred eighty-four footnotes throughout the book.
Chapter II (Law and the Certified Public Accountant’s Certificate) describes legal issues pertaining to the certification process. The background of many state certification requirements is presented with the legal implications of issues such as reciprocal certificates, memberships in professional accounting organizations, cancellation and reissuance of certificates. Court cases are also cited extensively throughout this chapter. The author’s interpretations and predictive views make this an interesting chapter. For example, Rich writes “In view of the present political, social and economic conditions demanding greater control of private business, it is probable that the United States supreme court would uphold a statute restricting the practice of public accounting to those certified.” (p. 141).
Chapter III (The Admissibility of the Public Accountant’s Expert Testimony in Court) is an excellent presentation of background material on expert testimony in general and the admissibility of accountant’s and auditor’s expert testimony in court. English and American law is cited throughout the chapter. Chapter subdivisions also include custody of records, authenticity of records, confidential communications, and primary versus secondary evidence.
Chapter IV (Some Special Rights of Public Accountants) is the shortest (30 pages) chapter and includes the following topics: champerty, ownership of working papers, liens upon employer’s books, rights under bankruptcy law, recoverability of auditor’s expenses, and the rights of practitioners of public accountancy to incorporate. The section on ownership of working papers is especially informative and currently very relevant.
This book was originally presented as the author’s thesis at Columbia University. It is well written, covers diverse technical topics, and cites many court cases. However, it requires careful attention by the reader. This book would be appropriate as one reference in graduate courses such as auditing, the environment of accounting, and history of accounting. It belongs in every university library.
