Accounting Case

Four years ago Ultramares Corp. of London, on the strength of the financial statement of Fred Stern & Co., Inc. of Manhattan, loaned Fred Stern & Co. money. Fred Stern & Co. soon went bankrupt. It was learned that the audit had been faulty. The audit had been made by Touche, Niven & Co. Ultramares Corp. brought a $203,000 suit against Touche, Niven & Co. All accountants have watched the case closely, thinking it would establish a precedent in the question of what responsibility auditors must shoulder.

Last week the Court of Appeals in Manhattan reversed a lower court's decision that Touche, Niven & Co. are liable for an employe's negligence. However, the Court held that if the audit said the figures were true, the accountants are guilty of deceit regardless of intent. Other accountants breathed more easily, realizing they could continue to protect themselves in audits by such buffers as "We believe." . . . "In our opinion."

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