Reference no: EM131662376

Question: Accountant's Liability. In 1995, JTD Health Systems, Inc., hired Tammy Heiby as accounting coordinator. Apparently overwhelmed by the duties of the position, Heiby failed to make payroll tax payments to the Internal Revenue Service (IRS) in 1995 and 1996. Heiby tried to hide this omission by falsifying journal entries and manually writing three checks out of sequence, totaling $1.7 million and payable to a bank, from JTD's cash account (to dispose of excess funds that should have been paid in taxes). JTD hired Price water house Coopers, LLP, to review JTD's internal accounting procedures and audit its financial statements for 1995. Coopers's inexperienced auditor was aware that the cash account had not been balanced in months and knew about the checks but never questioned them. The auditor instead mistakenly explained that the unbalanced account was due to changes in Medicaid/Medicare procedures and recommended no further investigation. In 1996, the IRS asked JTD to remit the unpaid taxes, plus interest and penalties. JTD filed a suit in an Ohio state court against Coopers, alleging common law negligence and breach of contract. Should Coopers be held liable to JTD on these grounds? Why or why not? [JTD Health Systems, Inc. v. Price water house Coopers, LLP, 141 Ohio App.3d 280, 750 N.E.2d 1177 (Ohio App. 3 Dist. 2001)]