CAST ART INDUSTRIES, LLC, ET AL. V. KPMG, LLP
A-2479-08T2 08-26-10
The phrase "at the time of the engagement by the client" in
N.J.S.A. 2A:53-25(b)(2)(a), which set forth one of the
prerequisites under the Accountant Liability Act for imposition
of a duty of care upon an auditor to a non-client, refers to the
entire period from when an accountant is retained to when an
audit report is issued. The evidence in this case satisfied all
the prerequisites of the Act for imposition of a duty of care to
a non-client. The determination of whether misstatements in an
auditor's report are material involves both quantitative and
qualitative considerations. Although an auditing firm's
internal rules may be admissible as evidence of whether
reasonable care was exercised, such internal rules may not be
relied upon to establish a higher standard of care than the
common law standard of reasonable care under all the
circumstances. If the evidence supports a finding that
accounting malpractice was a substantial factor in the
destruction of the business of a party entitled to rely upon an
auditor's report, the value of the destroyed business may be an
appropriate measure of damages.
