IMPORTANT: The NJCPA Privity Guide and Model Letters do not represent legal advice. CPAs and their clients are encouraged to seek that advice as appropriate.
An accountant quite obviously owes a duty of care to his or her client. This duty of care arises out of the contractual relationship, known as privity, between the two parties. Privity is an age-old concept recognized by the common law, which has been specifically codified in New Jersey to address the accountant-client relationship under N.J.S.A. 2A:53A-25, which is commonly referred to as the privity statute. However, accountants also may owe a duty of care to non-client third-parties under certain circumstances. The circumstances under which a duty to a non-client third-party may arise vary from state-to-state. In New Jersey, the privity statute, clarifies to whom an accountant owes a duty of care and for what transactions.1
To assist in better understanding the privity statute, the NJCPA offers this Privity Guide. Set forth below is a helpful question and answer section, an explanation of the privity test under the privity statute, and the text of the actual privity statute with an explanation of the evolution in the law leading to its adoption.
This Privity Guide also offers for reference purposes several sample forms you may want to consider if you are confronted with certain circumstances. For example, there are "model" reliance letters that CPAs may want to use to respond to clients who request such letters. These model forms are not legal advice and should not be relied upon as legal opinions or legally binding documents. In the event you believe it may be necessary to send such a letter out to any person you should consult with an attorney beforehand. The model letters reflect the experience NJCPA members have had since the legislation was enacted.
The NJCPA has developed this question and answer list to provide insight and information to CPAs and their clients.
1 If you are considering a situation involving a client who resides outside of New Jersey, or services that took place, or impacted the client, in a State other than New Jersey, you may need to consider the laws of other States, which may differ from New Jersey.
2 Black’s Law Dictionary
3 N.J.S.A. 2A:53A-25(b)(1)
4 N.J.S.A. 2A:53A-25(b)(2)(a-c)