In the accounting malpractice world, defendants often try to distinguish between a “look-see” and a thorough audit.  The audit examines bank records, backup, bills, invoices, tax returns, etc.  Anything else is merely a “compilation” based upon provided records, and the usual disclaimer is that the client was unwilling to pay for the full audit.  Unwilling to pay, they get less.

Town of Kinderhook v Vona  2016 NY Slip Op 01232 [136 AD3d 1202]  February 18, 2016
Appellate Division, Third Department  is an example of this defense failing.

“Pegeen Mulligan-Moore served as plaintiff’s bookkeeper from 2002 until 2010. Douglas McGivney was plaintiff’s Supervisor during that period and, in 2008, learned that plaintiff was experiencing cash flow problems and that Mulligan-Moore had deposited a large personal check into plaintiff’s bank account. He accordingly contacted defendant Leonard W. Vona, a certified public accountant and certified fraud examiner, and asked Vona to look into the situation. No written agreement was reached as to the nature and extent of Vona’s services, but an accountant in his employ reviewed documents provided by plaintiff, and a December 2008 report found no cause for suspicion with regard to the check or any other payments made on plaintiff’s behalf by Mulligan-Moore from January 2007 to August 2008. Vona was compensated for having produced the report and subsequently did consulting work for plaintiff.

Mulligan-Moore was replaced after McGivney left office, after which it became clear that she had falsified the records provided to Vona and had embezzled over $400,000 from [*2]plaintiff from 2007 onward.[FN1] Plaintiff commenced this action in 2011, asserting that Vona and related entities breached the terms of their contract with plaintiff and were professionally negligent in failing to uncover the malfeasance of Mulligan-Moore. Vona and defendant Fraud Auditing, Inc. (hereinafter collectively referred to as defendants) served an answer and, following discovery, moved for summary judgment dismissing the complaint against them. Supreme Court denied the motion, and this appeal ensued.”

“Vona specifically testified that he was not engaged to perform an audit, as an audit of town finances was not within his practice area and plaintiff did not wish to expend the sums necessary for a thorough investigation. Vona was plainly engaged to do something, however, as he tasked a subordinate with examining records provided by plaintiff to determine if there were overt problems and he billed plaintiff for a “review of [plaintiff’s] checking account.” He ultimately issued a written report reflecting that he had been hired “to examine documents and records of [plaintiff] for the direct purpose of offering opinions regarding those documents,” finding that there was nothing suspicious in those documents, and making various recommendations as to improved procedures. Defendants submitted the affidavit of a certified public accountant who categorized this work as a limited assignment to make findings based on documents provided by plaintiff, and opined that defendants had no duty to obtain the original banking documents in this non-audit because they had no authority to do so. He further opined that the losses incurred by plaintiff stemmed from the absence of internal controls over finances rather than any failings on the part of defendants, although he notably failed to explain how defendants’ ”alleged failure to detect and report the [fraud] . . . was not a proximate cause of the damages allegedly sustained by plaintiff[ ]” (C.P. Ward, Inc. v Deloitte & Touche LLP, 74 AD3d 1828, 1830 [2010]; see Collins v Esserman & Pelter, 256 AD2d 754, 757 [1998]).

Even accepting that the foregoing made out a prima facie case for summary judgment, material questions of fact were raised by plaintiff with the affidavit of accounting professor Eric [*3]Lewis.[FN2] Lewis made the obvious point that it was impossible for an accountant to perform work for a client without being engaged in some manner, and stated that examining financial records to determine whether funds were being handled improperly was an “audit-level service.” He further opined that, regardless of whether defendants were hired to conduct an audit or a less intensive service, they deviated from professional standards by failing to conduct a thorough investigation or otherwise explaining to plaintiff that the original banking records were essential to performing one. The deceptions of Mulligan-Moore would have been discovered had defendants acted according to professional accounting standards and obtained the original, unaltered banking records, and Lewis opined that defendants’ departure from those standards allowed the embezzlement to continue. Accordingly, Supreme Court properly denied that part of the motion seeking summary judgment on the accounting malpractice claim (see C.P. Ward, Inc. v Deloitte & Touche LLP, 74 AD3d at 1830-1831; Cumis Ins. Socy. v Tooke, 293 AD2d at 798-799).”

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Andrew Lavoott Bluestone

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened…

Andrew Lavoott Bluestone has been an attorney for 40 years, with a career that spans criminal prosecution, civil litigation and appellate litigation. Mr. Bluestone became an Assistant District Attorney in Kings County in 1978, entered private practice in 1984 and in 1989 opened his private law office and took his first legal malpractice case.

Since 1989, Bluestone has become a leader in the New York Plaintiff’s Legal Malpractice bar, handling a wide array of plaintiff’s legal malpractice cases arising from catastrophic personal injury, contracts, patents, commercial litigation, securities, matrimonial and custody issues, medical malpractice, insurance, product liability, real estate, landlord-tenant, foreclosures and has defended attorneys in a limited number of legal malpractice cases.

Bluestone also took an academic role in field, publishing the New York Attorney Malpractice Report from 2002-2004.  He started the “New York Attorney Malpractice Blog” in 2004, where he has published more than 4500 entries.

Mr. Bluestone has written 38 scholarly peer-reviewed articles concerning legal malpractice, many in the Outside Counsel column of the New York Law Journal. He has appeared as an Expert witness in multiple legal malpractice litigations.

Mr. Bluestone is an adjunct professor of law at St. John’s University College of Law, teaching Legal Malpractice.  Mr. Bluestone has argued legal malpractice cases in the Second Circuit, in the New York State Court of Appeals, each of the four New York Appellate Divisions, in all four of  the U.S. District Courts of New York and in Supreme Courts all over the state.  He has also been admitted pro haec vice in the states of Connecticut, New Jersey and Florida and was formally admitted to the US District Court of Connecticut and to its Bankruptcy Court all for legal malpractice matters. He has been retained by U.S. Trustees in legal malpractice cases from Bankruptcy Courts, and has represented municipalities, insurance companies, hedge funds, communications companies and international manufacturing firms. Mr. Bluestone regularly lectures in CLEs on legal malpractice.

Based upon his professional experience Bluestone was named a Diplomate and was Board Certified by the American Board of Professional Liability Attorneys in 2008 in Legal Malpractice. He remains Board Certified.  He was admitted to The Best Lawyers in America from 2012-2019.  He has been featured in Who’s Who in Law since 1993.

In the last years, Mr. Bluestone has been featured for two particularly noteworthy legal malpractice cases.  The first was a settlement of an $11.9 million dollar default legal malpractice case of Yeo v. Kasowitz, Benson, Torres & Friedman which was reported in the NYLJ on August 15, 2016. Most recently, Mr. Bluestone obtained a rare plaintiff’s verdict in a legal malpractice case on behalf of the City of White Plains v. Joseph Maria, reported in the NYLJ on February 14, 2017. It was the sole legal malpractice jury verdict in the State of New York for 2017.

Bluestone has been at the forefront of the development of legal malpractice principles and has contributed case law decisions, writing and lecturing which have been recognized by his peers.  He is regularly mentioned in academic writing, and his past cases are often cited in current legal malpractice decisions. He is recognized for his ample writings on Judiciary Law § 487, a 850 year old statute deriving from England which relates to attorney deceit.