explain the policy reasons for holding accountants liable to third parties whom they are not in privity?
1. Jimmy John, officer at MNC, a company on the New York Exchange, directed MNC sales in North America and Europe. In November of 2008, John sold more than 7,500 shares of MNC stock. The following March, John resigned from the firm, and the next month, he bought more than 20,000 shares of its stock. MNC provided some guidance to employees concerning the rules of insider trading, and with regard to John’s transactions, the corporation said nothing about the potential liability. Steve Tate, an MNC shareholder, filed a suit against MNC and John to compel recovery, under Section 16(b) of the Securities Exchange Act of 1934, of John’s profits from the purchase and sale of his shares. John argued that he should not be liable because he relied on MNC’s advice. Should the court order John to return his profits to the Corporation? Explain.
2. The accounting firm of Junk & sons prepared financial statements for Lucy, Inc. After reviewing the various financial statements, Days Bank agreed to loan Lucy $50,000 for expansion. When Lucy declared bankruptcy under Chapter 11 six months later, Days Bank promptly filed an action against Junk & sons, alleging negligent preparation of financial statements. Review and explain the results under the traditional Ultramares rule and the Restatement approach. Further, explain the policy reasons for holding accountants liable to third parties whom they are not in privity?