Accountants’ Liability Developments in 2009: Enforceability of Engagement Letter Provisions and Choice of Law

In 2009, several courts addressed issues related to one of the most important documents in any accountants’ liability case—the engagement letter defining the scope of the accounting firm’s engagement by its client. It is increasingly common for engagement letters to include provisions addressing how any disputes that may arise between the accounting firm and its client will be resolved. Several decisions this year discussed common engagement letter provisions, including arbitration clauses and limitation of liability clauses. Another decision addressed the important threshold question of what state’s law applies to professional liability claims brought by third parties against auditors.