On January 4, 1995, a judge in Putnam County, New York overturned a jury verdict against an accounting firm that had prepared a compilation report that was provided to the purchaser of the business of the accountants' client. The decision followed a three-week trial in the case of Casafina Enterprises Ltd. v. Berkow, et al.

The only claim at issue was whether the accountants were guilty of negligence in the preparation of the report and financial statement. In a seven- page decision, the court found in favor of the accountants, as a matter of New York law, that a nonclient user of a compilation report (containing the appropriate disclaimer language) cannot satisfy the second element of the Credit Alliance near privity test-reliance. This appears to be very good news for accountants in New York. What the decision is saying is that a third-party user of a compilation report cannot get standing to sue an accountant for negligence. Under the doctrine of Credit Alliance, a third-party user of audited (and perhaps reviewed) financial statements will be permitted to proceed in litigation for negligence if the third party can establish that it relied upon the accountant's report and that the accountant knew of such intended reliance through direct contact with the third party. The court is saying the very nature of a compilation report and its absence of any assurances about reliability on the part of the accountant would never give rise to a basis for reliance.

Under doctrine in New York, a third party could gain standing for purposes of suing an accountant if fraud "often very difficult to prove"is alleged.