Also known as: certified public accountants · CPA · CPAs
Written by attorneys — see sources below.
A licensed professional who has satisfied statutory and administrative requirements to practice public accounting. The designation authorizes the holder to perform financial audits, prepare tax returns, design accounting systems, and offer related advice to clients.
Cecilia Cabrera, an attorney also licensed as a certified public accountant, placed an advertisement stating her dual credentials. State regulators sought to discipline her for the listing. The court held the truthful statement protected and refused to impose sanctions or require a disclaimer.
Colin Chambers, a certified public accountant retained by Canyon Construction, issued an audit report that third-party investors later relied upon. When the company collapsed, the investors sued Chambers for negligence. The court measured his liability by the skill level expected of reputable certified public accountants in the community.
Osborne Computer Corporation was founded in 1980 by entrepreneur Adam Osborne and began manufacturing the Osborne I portable personal computer for the mass market, with shipments starting in 1981. By fall 1982, sales of the company's sole product had reached $10 million per month, making the company one of the fastest growing enterprises in the history of American business. In 1981 and again in 1982, the company retained Arthur Young & Company to audit its financial statements and issue audit reports. Arthur Young issued unqualified audit opinions on the company's 1981 and 1982 financial statements. The 1982 opinion was issued on February 11, 1983, appeared on Arthur Young's letterhead addressed to the company, and 100 copies of the professionally printed opinion were personally delivered to the company. The 1982 financial statements reported a modest net operating profit of $69,000 on sales of more than $68 million. In late 1982 the company postponed a planned initial public offering and instead issued warrants to investors in exchange for bridge financing loans or letters of credit. Plaintiffs, a group that included individuals as well as pension and venture capital funds, invested in the company in early 1983; one plaintiff, Robert Bily, purchased 37,500 shares of stock from Adam Osborne for $1.5 million. With one exception, plaintiffs testified that they made their investments in reliance on Arthur Young's unqualified 1982 audit opinion. After the warrant transaction closed on April 8, 1983, sales declined sharply because of manufacturing problems with the company's new Executive model computer, the public offering never occurred, and the company filed for bankruptcy on September 13, 1983, causing plaintiffs to lose their investments. Plaintiffs brought separate lawsuits against Arthur Young in Santa Clara County Superior Court that were consolidated for trial. Plaintiffs' expert witness identified more than 40 deficiencies in the 1982 audit amounting to gross professional negligence, including an understatement of liabilities by approximately $3 million that turned the reported $69,000 profit into a loss of more than $3 million, and testified that Arthur Young had discovered but failed to disclose material weaknesses in the company's internal accounting controls. After a 13-week trial the jury returned a verdict for plaintiffs on the professional negligence claim and awarded approximately $4.3 million in compensatory damages, but found for Arthur Young on the fraud and negligent misrepresentation claims. The trial court granted Arthur Young's motion for judgment notwithstanding the verdict on the negligence claim. The Court of Appeal reversed the judgment in favor of Arthur Young. The Supreme Court of California granted review.
View caseCameron Cruz, a certified public accountant whose right to practice before a federal board was revoked without a hearing, challenged the action. The court recognized the license as a protected interest requiring due process safeguards before termination.
Residents of New York City receiving financial aid under the federally assisted program of Aid to Families with Dependent Children (AFDC) or under New York State's general Home Relief program brought this action in the District Court for the Southern District of New York against the state and city officials who administered those programs. At the time the suits were filed, New York had no requirement of prior notice or hearing of any kind before termination of financial aid. The suits prompted the State Commissioner of Social Services to amend the Department of Social Services regulations. The amendment required local officials proposing to discontinue or suspend a recipient's aid to follow either subdivision (a) or subdivision (b) of § 351.26. The City of New York elected to follow subdivision (b). It promulgated Procedure No. 68-18. Under that procedure a caseworker who doubts a recipient's continued eligibility first discusses the doubts with the recipient. The caseworker then recommends termination to a unit supervisor. If the supervisor concurs, the recipient receives a letter stating the reasons for the proposed termination and notifying the recipient that within seven days he may request review by a higher official and may submit a written statement. The reviewing official decides whether to discontinue aid. Aid stops immediately upon affirmation, and the recipient is notified in writing of the reasons. The city's procedure contains no provision for the recipient's personal appearance before the reviewing official, for oral presentation of evidence, or for confrontation and cross-examination of adverse witnesses. The letter sent to the recipient states that he may request a post-termination fair hearing before an independent state hearing officer. At the hearing the recipient may appear personally, offer oral evidence, confront and cross-examine witnesses, and have a record made. If the recipient prevails, all funds erroneously withheld are paid. A recipient whose aid is not restored after the fair hearing may obtain judicial review under Article 78 of the New York Civil Practice Law and Rules. The District Court held that only a pre-termination evidentiary hearing would satisfy due process. The court rejected the argument that the combination of the post-termination fair hearing and the informal pre-termination review was constitutionally adequate. Only the Commissioner of Social Services of the City of New York appealed. The Supreme Court noted probable jurisdiction in 1969.
View caseCamila Cervantes, a certified public accountant, provided expert calculations used to determine a defendant's loss amount at sentencing. After the sentencing guidelines were held advisory, the court reconsidered the weight given to her figures in the final sentence.
Respondent Freddie Booker was charged with possession with intent to distribute at least 50 grams of crack cocaine in violation of 21 U.S.C. § 841(a)(1). The jury heard evidence that he possessed 92.5 grams in his duffel bag and found him guilty. Based on the jury's findings and his criminal history, the Guidelines called for a base sentence of 210 to 262 months. At sentencing, the district judge found by a preponderance that Booker possessed an additional 566 grams of crack and had obstructed justice. These findings raised the range to 360 months to life. The judge imposed 360 months. In the companion case, respondent Ducan Fanfan was convicted of conspiracy involving at least 500 grams of cocaine. The jury verdict authorized up to 78 months. The judge found additional facts that would have raised the range to 188 to 235 months but declined to apply them after Blakely. The Seventh Circuit held Booker's sentence violated the Sixth Amendment under Blakely and Apprendi. It remanded for resentencing based on jury findings. The Government sought certiorari in both cases, which the Court granted.
View caseCatherine Carter, a certified public accountant working on a corporate transaction, learned material nonpublic facts and traded on them. Prosecutors charged her with misappropriation. The court examined whether her CPA role created the requisite duty of trust and confidence.
In July 1988 Grand Metropolitan PLC retained the Minneapolis law firm Dorsey & Whitney as local counsel in connection with a potential tender offer for the common stock of the Pillsbury Company. James Herman O'Hagan was a partner at Dorsey & Whitney but performed no work on the Grand Met matter. Both Grand Met and the firm took steps to keep the tender offer plans confidential. Dorsey & Whitney withdrew from the representation on September 9, 1988. On August 18, 1988, while the firm still represented Grand Met, O'Hagan began purchasing call options on Pillsbury stock. He continued buying options through September and ultimately held 2,500 unexpired Pillsbury call options. In September he also purchased approximately 5,000 shares of Pillsbury common stock at a price just under $39 per share. On October 4, 1988, Grand Met publicly announced its tender offer. The price of Pillsbury stock rose to nearly $60 per share. O'Hagan sold his options and shares, realizing a profit of more than $4.3 million. The Securities and Exchange Commission investigated the trading and obtained a 57-count indictment charging O'Hagan with mail fraud, securities fraud under § 10(b) and Rule 10b-5 on a misappropriation theory, fraudulent trading in connection with a tender offer under § 14(e) and Rule 14e-3(a), and money laundering. A jury convicted him on all counts and the district court imposed a 41-month prison sentence. A divided panel of the Eighth Circuit reversed all convictions, holding that the misappropriation theory does not support liability under § 10(b) and that Rule 14e-3(a) exceeds the Commission's authority under § 14(e). The Supreme Court granted certiorari.
View caseClifford Cox, a certified public accountant whose firm prepared financial statements for a company later accused of fraud, was named as a RICO defendant. The court assessed whether the accounting work constituted participation in the alleged enterprise.
In 1979, petitioner Sedima, a Belgian corporation, entered into a joint venture with respondent Imrex Co. to provide electronic components to a Belgian firm. The buyer was to order parts through Sedima. Imrex was to obtain the parts in this country and ship them to Europe. The agreement called for Sedima and Imrex to split the net proceeds. Imrex filled roughly $8 million in orders placed with it through Sedima. Sedima became convinced that Imrex was presenting inflated bills, cheating Sedima out of a portion of its proceeds by collecting for nonexistent expenses. In 1982, Sedima filed this action in the Federal District Court for the Eastern District of New York. The complaint set out common-law claims of unjust enrichment, conversion, and breach of contract, fiduciary duty, and a constructive trust. In addition, it asserted RICO claims under § 1964(c) against Imrex and two of its officers. Two counts alleged violations of § 1962(c), based on predicate acts of mail and wire fraud. A third count alleged a conspiracy to violate § 1962(c). Claiming injury of at least $175,000, the amount of the alleged overbilling, Sedima sought treble damages and attorney's fees. The District Court held that for an injury to be "by reason of a violation of section 1962," as required by § 1964(c), it must be somehow different in kind from the direct injury resulting from the predicate acts of racketeering activity. It found no allegation here of any injury apart from that which would result directly from the alleged predicate acts of mail fraud and wire fraud. Accordingly, it dismissed the RICO counts for failure to state a claim. A divided panel of the Court of Appeals for the Second Circuit affirmed. After a lengthy review of the legislative history, the Court of Appeals held that Sedima's complaint was defective in two ways. It failed to allege an injury "by reason of a violation of section 1962." It also failed to allege that the defendants had already been criminally convicted of the predicate acts of mail and wire fraud, or of a RICO violation. In light of the variety of approaches taken by the lower courts and the importance of the issues, the Supreme Court granted certiorari.
View caseA gratuitous agent who is a certified public accountant must exercise the care and skill of a reasonable person in similar unpaid undertakings, taking into account any special skills the accountant actually possesses. The professional designation does not automatically impose the higher standard that applies to paid professional engagements.
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Yes. Language authorizing distributions for college tuition, reasonable living expenses, and job-related wardrobe items tied to specific employment creates an objective, measurable standard limited to health, education, support, and maintenance.
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Yes. Courts may reform a donative instrument to achieve the donor's tax objectives when a neutral professional such as the settlor's CPA provides evidence that the modification aligns with the donor's probable intent.
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