Full opinion text
ORDER O’KELLEY, Chief Judge. From January 21,1992 to May 7,1992, this court conducted the nonjury trial of the consolidated Abrams & Wofsy, Pignatelli, Ache-car, and Pendleton cases (“the Renaissance cases”). At trial, the plaintiffs and defendants KPMG Peat Marwick and Jerry F. Humphries (collectively “Peat Marwick”) presented evidence relevant to the Abrams & Wofsy, Pignatelli, and Pendleton plaintiffs’ claims of fraud and negligence brought pursuant to (1) section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5,17 C.F.R. § 240.10b-5 (hereinafter “section 10(b)”); (2) the Georgia Securities Act; (3) common law fraud under Georgia law; and (4) the Georgia law of professional negligence. The court now sets forth its findings of fact and conclusions of law relating to these claims. Fed.R.Civ.P. 52(a). In doing so, the court makes the following conclusions: (1) assuming that plaintiffs’ section 10(b) claims against Peat Marwick are not time-barred, these claims fail because the evidence does not show that Peat Marwick possessed the requisite scien-ter; (2) plaintiffs’ claims under the Georgia Securities Act fail because Peat Marwick did not act as a seller under the applicable version of section 10-5-12(a)(2) and no private cause of action is available under the applicable version of section 10-5-12(d); (3) plaintiffs’ common law fraud claims fail because the evidence does not show that Peat Mar-wick possessed the requisite scienter; (4) the Pignatelli and Pendleton plaintiffs’ federal and Georgia RICO claims fail because the requirement of two or more predicate acts has not been met; and (5) plaintiffs’ claims of professional negligence fail because the evidence does not show that Peat Marwick breached any duty owed to plaintiffs. I. The Rise and Fall of Renaissance Investment Corporation The evidence at trial showed that Renaissance Investment Corporation (“Renaissance”) was a company masterminded and run by Oliver Reid Dobbs, III. With the help of his father’s ample financial resources and his Renaissance staff, including such key figures as Stephanie Chisholm (vice-president of administration), Charles Shirley (vice-president of finance), and Tom Nelson (vice-president of construction), Dobbs acquired several residential properties in Atlanta, Georgia for the purpose of renovating them and selling them to investors. Judging from his educational background and his activities at Renaissance, as shown at trial, Dobbs appears to have been a relatively sophisticated businessman. He attended a well-regarded private high school in Atlanta, obtained bachelor’s and master’s degrees in business, and received the benefit of one year of law school. However, unfortunately for all those involved in the Renaissance litigation, he devoted his business acumen to pursuing any necessary means, including making fraudulent misrepresentations and involving other people in his scheme, to accomplish his burgeoning ambitions to develop and renovate these historic Atlanta properties. As the evidence revealed, Dobbs was quite adept at dealing with bankers, accountants, and lawyers who assisted him in structuring the renovation projects to secure debt and equity financing through bank loans and, more significantly, through the “syndication” process. Each syndication involved (1) forming a limited partnership for a real estate project, (2) preparing an offering circular, known as a private placement memorandum (“PPM”), to induce investment in the project, (3) circulating the PPM to a limited number of prospective investors, who were generally quite wealthy and were interested in investments with significant tax benefits, and (4) admitting a limited number of investors as limited partners of the real estate limited partnership so that equity financing could be raised. After completing a few small real estate renovation projects, Renaissance began its first syndication effort in 1984 with the Bilt-more “Executive Wing,” which was part of the historic Biltmore hotel. The Executive Wing project was acquired by a entity affiliated with Renaissance known as Atlanta Bilt-more Associates, Ltd., of which Renaissance was the general partner. Through the syndication process, Atlanta Biltmore Associates, Ltd. sold the project to an entity known as Biltmore Towers Associates, Ltd.; limited partnership interests were offered in an entity known as Executive Wing Partners, Ltd., which acquired a sixty-one percent general partnership interest in Biltmore Towers Associates, Ltd. As general partner of Executive Wing Partners, Ltd. and Atlanta Bilt-more Associates, Ltd., Renaissance was actively involved with the development of the Executive Wing project and the marketing of limited pai'tnership interests in Executive Wing Partners, Ltd. The Executive Wing Partners, Ltd. PPM,which was dated December 23, 1984, disclosed that Dobbs Industries Construction Company (“DICC”), another affiliate of Renaissance, had undertaken the renovation work. Exh. 5012 at Bates P0018341. The PPM further disclosed that construction was anticipated to be' completed by February 28, 1985. Id. In addition, the PPM' disclosed that the project was encumbered by a $10,-000,000 “wraparound deed to secure debt,” which represents the purchase money financing of the project, executed by Atlanta Bilt-more Associates, Ltd. in favor of O.P.D.I.U.S. (“OPDI”). Id. at Bates P0018354. Last, the PPM disclosed that the proceeds of the syndication closing would be held in escrow until, among other things, DICC completed its construction work and the rehabilitation of the project was finished. Id. at Bates P0018355. The evidence showed that substantial delays in construction occurred on the Executive Wing project, which in turn caused serious problems with OPDI and other creditors. When construction was complete and the escrow funds were released in late September, 1985, an enormous number of liens and lawsuits related to the project had accumulated. Claiming that Atlanta Biltmore Associates, Ltd. had defaulted on its obligation, OPDI brought two lawsuits against Atlanta Bilt-more Associates, Ltd. and Renaissance. By the time escrow broke, the financial condition of Renaissance and DICC had become seriously troubled because of the desperate need for fees and profits due from the Executive Wing syndication. Despite these dire problems resulting from delays in the release of the Executive Wing escrow, Renaissance forged ahead with plans for additional real estate syndications. In the summer and fall of 1985, Dobbs and Renaissance engineered syndications for two properties known as the St. Andrews and the Granada; in each syndication, Renaissance acted as general partner. In the fall of 1985, the syndication of a property known as 696 Peachtree Street was completed, again with Renaissance as general partner. Last, Renaissance tried to syndicate the Georgian Terrace property in early 1986. For each syndication, Dobbs secured the professional services of well-respectéd accounting firms and law firms. All of these projects eventually failed. At trial, evidence was submitted showing that closing proceeds from the Granada syndication were improperly diverted by Renaissance. Instead of applying the funds as contemplated and disclosed in the Granada PPM, Renaissance used a substantial portion of the proceeds to satisfy obligations arising in connection with other Renaissance projects. The evidence further demonstrated that Renaissance (i.e., Dobbs) intended to divert similarly some proceeds of the 696 Peachtree syndication closing. These activities, as well as numerous misrepresentations made by Renaissance in connection with the St. Andrews and 696 Peachtree offerings to prospective investors and professionals involved in the offerings, constitute the fraud in which Renaissance was. engaged. As set forth herein, Peat Marwick performed accounting services in connection with the offering of limited partnership interests in the St. Andrews and 696 Peachtree limited partnerships. First, Peat Marwick carried out a “compilation” service for St. Andrews Associates, Ltd. (“St. Andrews”), which was subsequently upgraded to a “review” service. Second, Peat Marwick performed a “review” service for 696 Peachtree Street, Ltd. (“696 Peachtree”). Peat Mar-wick’s work on the St. Andrews and 696 Peachtree projects entailed investigating the prospective financial information contained in financial projections that were prepared by Renaissance and included in the PPMs. For each service performed, Peat Marwick issued reports that were distributed to prospective investors. The Abrams & Wofsy plaintiffs are all investors who purchased limited partnership interests in the St. Andrews Associates, Ltd. The Pignatelli and Pendleton plaintiffs are all investors who purchased limited partnership interests in the 696 Peachtree Street, Ltd. The Achecar plaintiffs purchased limited partnership interests in The Granada, Ltd., for which Peat Marwick did not perform any accounting services. II. Plaintiffs’ Claims Under Section 10(b) A. Primary Liability Scienter is a required element of section 10(b) claims in which primary liability is alleged. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193, 96 S.Ct. 1375, 1380, 47 L.Ed.2d 668 (1976); McDonald v. Alan Bush Brokerage Co., 863 F.2d 809, 814 (11th Cir.1989). In the landmark ease of Hochfelder, the United States Supreme Court defined scien-ter as “a mental state embracing intent to defraud, reckless disregard for the truth, or knowing use of some practice to defraud.” 425 U.S. 185, 193-94 n. 12, 96 S.Ct. 1375, 1380-82 n. 12. The Court declined to address the issue of whether recklessness could satisfy the scienter requirement, thereby leaving the issue open for resolution by the lower federal courts. Id. Subsequently, the Eleventh Circuit ruled that the scienter requirement may be satisfied by proof of “severe recklessness.” Magna Inv. Corp. v. John Does One Through Two Hundred, 931 F.2d 38, 39 (11th Cir.1991); Broad v. Rockwell Intern. Corp., 642 F.2d 929, 961-62 (5th Cir.) (en banc), cert. denied, 454 U.S. 965, 102 S.Ct. 506, 70 L.Ed.2d 380 (1981). To hold Peat Marwick primarily liable for violations of section 10(b), assuming that at least one plaintiffs section 10(b) claim is not time-barred, the court must first find that Peat Marwick had knowledge of the fraud or acted with reckless disregard of the falsity of the information that was furnished to the potential investors regarding the offerings. If the court were to find that Peat Marwick had actual knowledge of the fraud or was severely reckless, the court would next need to determine whether Peat Mar-wick had a duty to disclose the information, which it knew or should have known, to the Abrams & Wofsy, Pignatelli, and Pendleton plaintiffs. Under section 10(b), “a defendant’s omission to state a material fact is proscribed only when the defendant has a duty to disclose.” Rudolph v. Arthur Andersen & Co., 800 F.2d 1040, 1043 (11th Cir. 1986), cert. denied, 480 U.S. 946, 107 S.Ct. 1604, 94 L.Ed.2d 790 (1987). Because the court finds that the evidence does not support a finding that Peat Marwick had actual knowledge or was severely reckless, however, consideration of this issue is unnecessary. B. Aider and Abettor Liability To succeed on their claims of aider and abettor liability, again assuming that at least one plaintiffs section 10(b) claim is not time-barred, the plaintiffs must prove: (1) the existence of a primary violation of section 10(b); (2) that Peat Marwick had a general awareness that its role was part of an overall activity that was improper; and (3) that Peat Marwick “knowingly and substantially assisted” the section 10(b) violation. Woodward v. Metro Bank of Dallas, 522 F.2d 84, 94-95 (5th Cir.1975); Woods v. Barnett Bank of Fort Lauderdale, 765 F.2d 1004, 1009, reh’g denied, 772 F.2d 918 (11th Cir.1985). During the Renaissance trial, the court held orally that a primary violation had been proved, that is, the plaintiffs had shown that corporate officers of Renaissance had committed securities fraud in connection with the St. Andrews and 696 Peachtree offerings. Accordingly, the court may now focus on whether plaintiffs have proved the second and third elements of their aider and abettor claims. In Woodward, the former Fifth Circuit required that to satisfy the second element of “general awareness,” a plaintiff must prove that the alleged aider and abettor had “knowledge” of the fraud. “Knowledge may be shown by circumstantial evidence, or by reckless conduct, but the proof must demonstrate actual awareness of the party’s role in the fraudulent scheme.” 522 F.2d at 96. Subsequently, in Woods, the Eleventh Circuit held that this scienter requirement is satisfied by the same “severe recklessness” standard as required for primary 10(b) claims, “at least where the alleged aider and abettor owes a duty to the defrauded party.” 765 F.2d at 1010. As set forth more fully herein, the court finds that the evidence does not support a finding that Peat Marwick had any knowledge of the fraud under either an “actual awareness” or a “severe recklessness” standard. Accordingly, it is not necessary to determine whether Peat Marwick owed any duty to plaintiffs, the defrauded parties. In addition, because the court finds that the evidence fails to support a finding that the second element is satisfied, consideration of the third element is unnecessary. III. Plaintiffs’ Claims Under the Georgia Securities Act In their original complaints, the Abrams & Wofsy, Pignatelli, and Pendleton plaintiffs alleged that Peat Marwick violated section 10-5-12(a)(2) of the Georgia Code in connection with the sale of limited partnership interests in the St. Andrews and 696 Peachtree Street limited partnerships. The applicable version of the Georgia Securities Act is that which existed when the underlying facts and circumstances surrounding the alleged securities fraud occurred. O.C.G.A. § 10-5-23 (1989). In this case, the evidence has shown that the facts and circumstances underlying the alleged fraud and professional negligence occurred in 1984, 1985, and arguably through the early part of 1986. The same version of the Georgia Securities Act was in effect in 1984, 1985, and 1986 until the Act was altered substantially by amendments enacted on April 11, 1986. Because nearly all, if not all, of the relevant underlying facts and circumstances occurred prior to April 11, 1986, the court finds that the 1985 version of the Georgia Securities Act applies to the Renaissance litigation. The 1985 version of section 10-5-12(a)(2) closely tracks the language of section 12(2) of the Securities Act of 1933, 15 U.S.C. § 111 {2) (1981), which establishes seller liability for securities fraud. The court previously determined that Peat Marwick did not act as a “seller” of limited partnership interests in the St. Andrews and 696 Peach-tree and accordingly granted Peat Marwick’s motion for summary judgment with respect to plaintiffs’ section 12(2) claims. See Order dated Sept. 27, 1991 at 12-16, 19-20. Based on this finding, the court holds similarly that Peat Marwick did not act as a seller under the 1985 version of section 10 — 5—12(a)(2) of the Georgia Code. Alternatively, plaintiffs seek to hold Peat Marwick liable under the 1985 version of section 10 — 5—12(d), which provides: (d) It shall be unlawful for any person in connection with the offer, sale, or purchase of any security, directly or indirectly, (1) to employ any device, scheme, or artifice to defraud, or (2) to engage in any transaction, act, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser or seller. Ga.Code Ann. § 97 — 112(d) (1981). In count six of their original complaint, the Pignatelli plaintiffs alleged that Peat Marwick violated both sections 10-5-12(a)(2) and 10 — 5—12(d) of the Georgia Securities Act. More recently, the plaintiffs in the other three cases have argued that their section 10-5-12(a)(2) claims were intended to be claims made pursuant to the 1985 version of section 10-5-12(d). See Plaintiffs’ Proposed Findings of Fact and Conclusions of Law at 75 n. 10 (“It is obvious that Plaintiffs’ reference to § 12(a)2 in the complaints was to the Georgia Securities Act as it existed in 1987 and, hence, to § 12(d) as it existed in 1987.”). The allegations in the Abrams & Wofsy and Achecar complaints track Rule 10b-5, 17 C.F.R. § 240.10b-5; subsections (a) and (c) of Rule 10b-5 are substantially identical to former section 10-5-12(d). The allegations in the Pendleton complaint track former section 10-5-12(a)(2). Even if the court were to permit any of the plaintiffs to pursue claims under former section 10-5-12(d), this provision would not afford them any right to relief because it does not provide a private cause of action. See Order dated Sept. 23, 1988 at 22; Diamond v. Lamotte, 709 F.2d 1419, 1423, reh’g denied, 716 F.2d 914 (11th Cir.1983); but see Friedlander v. Nims, 571 F.Supp. 1188 (N.D.Ga.1983) (Shoob, J.), aff'd on other grounds, 755 F.2d 810 (11th Cir.1985) (sections 10-5-14(e) and 51-1-8 of the Georgia Code make a private cause of action available for violations of former section 10 — 5—12(d)). Because the 1985 version of the Georgia Securities Act is applicable to plaintiffs’ claims, the court finds that Peat Marwick is not liable under the current version of section 10-5-12(a)(2). The court further finds that Peat Marwick is not liable under former section 10 — 5—12(a)(2) because it did not act as a seller. In addition, the court finds that Peat Marwick is not liable under former section 10-5-12(d) because such provision does not afford a private cause of action. TV. Plaintiffs’ Common Law Fraud Claims To succeed on their claims of common law fraud under Georgia law, plaintiffs must prove that Peat Marwick made a false representation of fact with scienter and with the intention to induce the plaintiffs to invest in the St. Andrews and 696 Peachtree limited partnerships, on which plaintiffs relied and which caused damages to the plaintiffs. De-Long Equip. Co. v. Washington Mills Abrasive Co., 887 F.2d 1499, 1519 (11th Cir.1989), cert. denied sub nom., Washington Mills Electro Minerals Corp. v. DeLong Equip. Co., 494 U.S. 1081, 110 S.Ct. 1813, 108 L.Ed.2d 943 (1990); Seale v. Miller, 698 F.Supp. 883, 898 (N.D.Ga.1988) (Hall, J.); Crawford v. Williams, 258 Ga. 806, 806, 375 S.Eüd 223 (1989); Ekstedt v. Charter Medical Corp., 192 Ga.App. 248, 248, 384 S.E.2d 276 (1989). Under Georgia law, the scienter requirement encompasses either actual knowledge or recklessness. American Viking Contractors, Inc. v. Scribner Equip. Co., Inc., 745 F.2d 1365, 1372 (11th Cir.1984); Grizzle v. Guarantee Ins. Co., 602 F.Supp. 465, 467 (N.D.Ga.1984) (O’Kelley, J.); Irvin v. Lowe’s of Gainesville, Inc., 165 Ga.App. 828, 830, 302 S.E.2d 734 (1983). Recklessness constitutes a deliberate “refusal to know” where one “blind[s] himself to the truth or falsity of a condition which he recklessly represents to his own advantage.” Bill Spreen Toyota, Inc. v. Jenquin, 163 Ga.App. 855, 858, 294 S.E.2d 533 (1982). See also Lively v. Garnick, 160 Ga.App. 591, 592-93, 287 S.Eüd 553 (1981) (fraud is premised on “actual moral guilt” of the defrauding party). Although the recklessness standards under section 10(b) and the Georgia law of common law fraud are not identical, the court finds that the scienter requirements are substantially similar. Accordingly, because plaintiffs’ section 10(b) claims fail for lack of scienter (assuming that at least one plaintiffs section 10(b) claim is not time-barred), the court finds that plaintiffs’ common law fraud claims fail. V. Plaintiffs’ Federal and Georgia RICO Claims The Pignatelli and Pendleton plaintiffs allege that Peat Marwick, in performing its work in connection with the St. Andrews and 696 Peachtree engagements, committed violations of federal RICO and Georgia RICO provisions. See 18 U.S.C. § 1962(c); O.C.G.A. § 16-14-4(b). To succeed on their RICO claims, these plaintiffs must prove that Peat Marwick participated in the conduct of an enterprise through a pattern of racketeering activity. See Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985); Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits, 953 F.2d 587, 593 (11th Cir., Feb. 12, 1992); see also Pelletier v. Zweifel, 921 F.2d 1465, 1491 n. 57 (11th Cir.) (Georgia RICO provisions are “essentially identical” to federal RICO provisions), cert. denied, — U.S. -, 112 S.Ct. 167, 116 L.Ed.2d 131 (1991); Chancey v. State, 256 Ga. 415, 349 S.E.2d 717 (1986) (Despite some differences, federal RICO section 1962(c) and Georgia Code section 16-14-4(b) “are similar in that the foregoing core provisions both make it unlawful for any person employed by or associated with any enterprise to conduct or participate in, directly or indirectly, such enterprise through a pattern of racketeering activity.”), cert. denied 481 U.S. 1029, 107 S.Ct. 1954, 95 L.Ed.2d 527 (1987); Martin v. State, 189 Ga.App. 483, 485, 376 S.E.2d 888, 892 (1988) (Georgia RICO provisions are “closely analogous” to federal RICO provisions), cert. denied (1989). To satisfy the “pattern of racketeering activity” requirement, plaintiffs must show that Peat Mar-wick engaged in at least two predicate acts of “racketeering activity.” See 18 U.S.C. § 1961(5); Bivens Gardens Office Bldg., Inc. v. Barnett Bank of Florida, Inc., 906 F.2d 1546, 1553 n. 10 (11th Cir.1990), cert. denied sub nom., Barnett Banks, Inc. v. Konstand, — U.S. -, 111 S.Ct. 1695, 114 L.Ed.2d 89 (1991); O.C.G.A. § 16-14-3(8); Chancey, 256 Ga. at 418, 349 S.E.2d 717. The Pignatelli and Pendleton plaintiffs contend that they have satisfied the predicate act requirement by proving that Peat Marwick committed at least two acts of securities and wire fraud in the course of its work on the St. Andrews and 696 Peachtree engagements. See 18 U.S.C. §§ 1961(1)(B), (D); O.C.G.A. §§ 16-14-3(9)(A)(xxix). The court has found, however, that Peat Marwick lacked knowledge of the fraud perpetrated by Renaissance; consequently, the court now finds Peat Marwick did not commit any predicate acts of fraud as alleged by plaintiffs. Without the requisite predicate acts, the Pig-natelli and Pendleton plaintiffs’ claims of federal and Georgia RICO violations against Peat Marwick must fail. VI. Plaintiffs’ Professional Negligence Claims To succeed on their claims of professional negligence against Peat Marwick, the Abrams & Wofsy, Pignatelli and Pendleton plaintiffs must prove by a preponderance of the evidence that the following elements are satisfied: (1) a legal duty to conform to a standard of conduct raised by the law for the protection of others against unreasonable risks of harm; (2) a breach of this standard; (3) a legally attributable causal connection between the conduct and the resulting injury; and (4) some loss or damage flowing to the plaintiffs legally protected interest as a result of the alleged breach of the legal duty. Whitehead v. Cuffie, 185 Ga.App. 351, 352, 364 S.E.2d 87 (1987) (citations omitted), cert. denied (1988). See also Bradley Center, Inc. v. Wessner, 250 Ga. 199, 200, 296 S.E.2d 693 (1982) (same elements); Hill v. McClure, 171 Ga.App. 588, 589, 320 S.E.2d 562 (1984) (same elements). A. Peat Marwick Owed a Duty to Investors With respect to the first element, professionals, including accountants, owe a duty under Georgia law to “those persons ... who the professional is actually aware will rely upon the information he prepared.” Badische Corp. v. Caylor, 257 Ga. 131, 132-33, 356 S.E.2d 198 (1987). See also Robert & Co. Assocs. v. Rhodes-Haverty Partnership, 250 Ga. 680, 680-81, 300 S.E.2d 503 (1983) (engineers; privity is not required); Gulf Contracting v. Bibb County, 795 F.2d 980, 982 n. 3 (11th Cir.1986) (following Robert & Co.); Malta Constr. Co. v. Henningson, Durham & Richardson, Inc., 716 F.Supp. 1466, 1468 (N.D.Ga.1989) (Hall, J.) (following Robert & Co.), aff'd, reh’g denied, 927 F.2d 614, 932 F.2d 979 (1991); Travelers Indemnity Co. v. A.M. Pullen & Co., 161 Ga.App. 784, 789, 289 S.E.2d 792 (1982) (accountants; duty owed depends on foreseeability of reliance). As discussed more fully infra, Peat Marwick issued its reports to “The Partners” of the St. Andrews and 696 Peachtree limited partnerships. Peat Marwick was well aware that these reports were to be included and were in fact included in the St. Andrews and 696 Peachtree offering materials. Peat Mar-wick also knew that the offering materials were distributed to the Abrams & Wofsy, Pignatelli and Pendleton plaintiffs, who were then potential St. Andrews and 696 Peachtree investors, for the purpose of assisting them in deciding whether to invest in the limited partnerships. Based on the foregoing, the court finds that Peat Marwick was aware that plaintiffs would rely on the information it provided in its reports and, therefore, owed a duty under Georgia law to the plaintiffs. B. Standards Under Which to Judge Peat Marwick’s Work Under Georgia law, professionals such as Peat Marwick owe a duty “to use such skill, prudence, and diligence as [professionals] of ordinary skill and capacity commonly possess and exercise in the performance of the tasks which they undertake.” Hughes v. Malone, 146 Ga.App. 341, 344, 247 S.E.2d 107 (1978). See also Kellos v. Sawilowsky, 254 Ga. 4, 5-6, 325 S.E.2d 757 (1985) (same language). In Georgia, a presumption exists that professional services were performed in an ordinarily skillful manner, and therefore the recipient of the professional services has the burden to show, through the use of expert testimony, the lack of due care, skill, and diligence. Grindstaff v. Coleman, 681 F.2d 740, 742 (11th Cir.1982); Rogers v. Norvell, 174 Ga.App. 453, 457, 330 S.E.2d 392 (1985); Hughes, 146 Ga.App. at 346, 247 S.E.2d 107. See also Howard v. Walker, 242 Ga. 406, 407, 249 S.E.2d 45 (1978) (requirement of expert opinion testimony); Roberts v. Langdale, 185 Ga.App. 122, 123, 363 S.E.2d 591 (1987) (presumption that professional services were performed in ordinarily skillful manner). In other words, the expert testimony must demonstrate that the professional’s conduct was so unreasonable as to constitute a “significant deviation” from the applicable standards of care. Hughes, 146 Ga.App. at 345, 247 S.E.2d 107. Expert testimony showing a mere difference in views between techniques or judgments exercised is insufficient to show a breach of duty “where it is shown that the procedure preferred by each, or the judgment exercised, is an acceptable and customary method of performing the [professional services].” Hayes v. Brown, 108 Ga.App. 360, 366, 133 S.E.2d 102 (1963). Peat Marwick’s work on the St. Andrews and 696 Peachtree entailed reporting on financial projections. At trial, plaintiffs and Peat Marwick submitted expert testimony regarding the standards applicable to accountants as found in publications issued by the American Institute of Certified Public Accountants (“AICPA”). In addition, evidence was admitted regarding Peat Mar-wick’s internal standards as found in Peat Marwick’s “Prospective Reporting Practice Guide,” (“Guide”). See Exh. 924. Peat Marwick’s expert witness, Don Pal-láis, testified that the AICPA standards for prospective financial reporting, the type of work performed by Peat Marwick in the St. Andrews and 696 Peachtree engagements, have undergone an evolutionary process of development. Plaintiffs’ expert, Robert J. Taylor, IV, similarly testified that various AICPA publications represent a “moving body of knowledge” such that certain publications that are not specifically applicable to certain types of accounting work may be applicable “in pertinent part.” Both experts testified that in 1985, with the exception of an “exposure draft” discussed infra, no AIC-PA publications had been issued that directly addressed the standards under which accountants operated in reporting on financial projections. Accordingly, in 1985, AICPA literature that addressed other types of prospective financial reporting could be followed by accountants in reporting on financial projections. In 1975, the AICPA published the “Management Advisory Services Guideline Series Number 3: Guidelines for Systems for the Preparation of Financial Forecasts.” (“MAS # 3”), the objective of which was to “define guidelines for a system for the preparation of financial forecasts.” See Exh. 45,584 at 39, 42. In MAS #3, the term “forecast” is defined as “an estimate of the most probable financial position, results of operations, and changes in financial position for one or more future periods.” Id. at 43. MAS # 3 explains the accountant’s role: The preparation of a financial forecast is the responsibility of the management of an enterprise. Management may require the assistance and counsel of outside professionals in meeting this responsibility. Nothing in this document precludes the CPA from assisting management in the preparation of financial forecasts and in the development of forecasting systems. Id. at 46. The AICPA issued another publication in 1975 entitled “Statement of Position 75-4: Presentation and Disclosure of Financial Forecasts” (SOP 75-4). Id. at 55. As explained in its introduction, SOP 75-4 was issued because of the great interest shown at the time in financial forecasts and projections, which were being used in connection with obtaining debt or equity financing as well as in offering circulars for limited partnership interests. Id. at 57. In SOP 75-4, “financial projection” is defined as “an estimate of financial results based on assumptions which are not necessarily the most likely. Financial projections are often developed as a response to such questions as ‘What would happen if?’ ” Id. at 58. In 1980, the Financial Forecasts and Projections Task Force of the AICPA issued the “Guide for a Review of a Financial Forecast,” (“ ’80 Guide”) which “representad] another of the AICPA’s efforts to provide information and guidance to those interested in prospective financial information.” Id. at v. As the ’80 Guide explained in its preface: Prospective financial information may take a number of different forms, such as forecasts, projections, feasibility studies, and budgets. Accountants may be engaged to provide a variety of services relating to prospective financial information, such as providing assistance in developing forecasting systems, identifying factors to be considered, and compiling or preparing the prospective information and carrying out independent reviews of such information. This guide deals with only one form of prospective information — financial forecasts — and only one type of accountant’s service — independent review and reporting. With a view toward providing guidance in additional areas, the AICPA is studying other forms of prospective financial information and other types of related services that accountants are engaged to perform. Id. The ’80 Guide includes the MAS # 3 and SOP 75-2 in its appendices. See id. at 39, 55. In 1983, the Financial Forecasts and Projections Task Force of the AICPA issued an “Exposure Draft: Proposed Guide for Prospective Financial Statements” (“ ’83 Exposure Draft”). See Exh. 45,587. Peat Mar-wick’s expert, Pallais, was a member of this task force and the principal author of the ’83 Exposure Draft. As he explained at trial, the ’83 Exposure Draft was prepared for circulation to accountants all over the United States and for responses and comments from them. The ’83 Exposure Draft ultimately resulted in the 1986 AICPA publication entitled the “Guide for Prospective Financial Statements” (“ ’86 Guide”), which addressed all types of prospective financial statements including, for the first time, financial projections. See Exh. 45,585 at § 110.01-02. Although the ’86 Guide is not binding on Peat Marwick’s work on the St. Andrews and the 696 Peachtree engagement, it is relevant because it illustrates another step in the development of AICPA standards for reporting on financial projections. Despite the fact that no AICPA standards that explicitly governed reporting on financial projections existed when Peat Marwick carried out its work on the St. Andrews and 696 Peachtree projections, the court finds that the AICPA literature that was issued prior to such time is relevant to the judicial determination of whether Peat Marwick was negligent in carrying out its St. Andrews and 696 Peachtree work. In addition, because the evidence shows that the Peat Marwick accountants utilized and followed their own internal guide in conducting their work on the St. Andrews and 696 Peachtree engagements, the court finds that Peat Marwick’s Guide is also relevant to this determination. After careful review of the evidence as set forth infra, the court finds that Peat Mar-wick did not breach its legal duty owed to the St. Andrews and 696 Peachtree investors. The evidence shows that plaintiffs have not met their burden to prove that Peat Marwick lacked due care, skill, and diligence in carrying out its work on the St. Andrews and 696 Peachtree projects. Accordingly, the consideration of the third and fourth elements of plaintiffs’ negligence claims, causation and damages, is not necessary. The court therefore holds that the Abrams & Wofsy, Pigna-telli, and Pendleton plaintiffs’ claims of professional negligence against Peat Marwick fail. VII. Peat Marwick’s Work A. The Pre-Engagement Client Evaluation Peat Marwick’s professional relationship with Renaissance began in July of 1985 when Jerry F. Humphries, a partner in the Atlanta Peat Marwick office since 1983, undertook a pre-engagement evaluation of Renaissance for purposes of determining whether to accept a compilation engagement for the syndication, that is, the offering of limited partnership interests in the St. Andrews. 1. Standards Governing the Pre-Engagement Client Evaluation At trial, Humphries testified that Peat Marwick undertook the St. Andrews compilation engagement on July 23, 1985, after he assessed Renaissance’s integrity through the client evaluation process. Humphries testified that he followed the procedures prescribed in a Peat Marwick internal guideline entitled “Real Estate Practice Bulletin,” dated May 3,1982 (“Bulletin”), which was admitted into evidence at trial as Exhibits 1776A and 1776B. The Peat Marwick Bulletin contains several prerequisites for accepting a new client. First, it requires that someone act as “engagement partner.” The engagement partner, who must have substantial experience in real estate limited partnership offerings, is “responsible for determining that the integrity, reputation, and financial condition of the client and other involved parties are satisfactory.” Exh. 1776A at Bates P0014004. In the case of a new client, the engagement partner must conduct a pre-engagement client evaluation. Id. In all of Peat Mar-wick’s work on the St. Andrews and 696 Peachtree projects, Humphries acted as engagement partner. Second, “second partner review of the engagement by a real estate designated industry specialist (DIS) is required.” “[T]he DIS must concur with the engagement partner’s determination that the engagement satisfies the conditions of this Practice Bulletin and that the project does not entail high risk/uncertainty, in contemplation of providing the proposed compilation-type service.” Id. at Bates P0014002. Third, the Bulletin provides that “the Firm’s independence requirements must be satisfied.” Last, the Bulletin requires that “[t]he client must have a successful track record in the type of project contemplated” and “[t]he contractor, if any, must have completed at least one project similar in nature to the one proposed.” Id. at Bates P0014004. Peat Marwick’s Guide provides similar instructions on deciding whether to accept an engagement. First, it prescribes that the prospective client be evaluated. Second, the Guide requires that the Firm possess suffi-eient expertise to carry out the proposed engagement. Quoting from the AICPA Executive Committee on Management Advisory Services Statement No. 2, the Guide sets forth the following standards: 1. Management advisory services are to be performed by persons having adequate training and experience in both the application of the analytical approach and process, and in the subject matter under consideration (emphasis added). 2. In all matters relating to a management advisory services assignment, an independence in mental attitude is to be maintained by the member and his staff. 3. Due professional care is to be exercised in the performance of management advisory services. Exh. 924 at Bates P0007611. As part of Peat Marwick’s competence requirements, the Guide provides for the appointment of “designated industry specialists,” who are responsible for undertaking second partner review. Id. at Bates P0007612 and n. 1. Last, the Guide requires that an evaluation be made of the risk or uncertainty underlying the proposed prospective reporting engagement. Id. at Bates P0007616. Examples of high-risk situations that Peat Marwick should not undertake are where (1) “[significant uncertainty exists relative to the Firm’s legal position and exposure” and (2) “[i]t might be impossible to satisfy ourselves that all key assumptions are reasonable, or to conclude that there is no reason to suspect that assumptions are unreasonable, depending on the nature of the engagement.” Id. An example of a situation that might suggest high risk is when a “new venture” is involved, “where no demonstrated ‘track record’ exists for the management and/or the substance of the proposed venture.” Id. The Guide further instructs: “The judgment as to whether the risk/uncertainty associated with a potential prospective reporting engagement is acceptable to the Firm follows a careful consideration of the specific circumstances and is made by the engagement partner and concurred with by the designated industry specialist....” Id. at Bates P0007617. 2. Nadeau’s Client Evaluation Work In his role as engagement partner, Hum-phries instructed David Nadeau, a Peat Mar-wick accountant, to gather information for the client evaluation. In gathering this information about Renaissance, Nadeau made several phone calls and then made handwritten notes reflecting what he thought was significant. First, Nadeau talked to Michael Hoover, a Hurt Richardson attorney who had done a substantial amount of real estate work on behalf of Renaissance on various projects. As reflected in Nadeau’s notes, Hoover made both positive and negative comments: On July 23, 1985 I contacted Mike Hoover of Hurt, Richardson who represented Renaissance. Mike said he has been involved with the client for a couple of years on and off. He feels the clients have some good ideas and have been reasonably successful in carrying out those ideas. He indicated however that the client was slow in paying. Apparently no one has been paid yet for the Executive deal as the funds are still tied up in escrow. In addition he said the company tends to spread itself thin by acquiring property beyond its means, however, he feels this is due more to “seizing the moment” to — grab good deals. He feels the principals have a high degree of integrity. Exh. 1701 at Bates P0000998. At trial, Na-deau testified that he had no specific recollection of this telephone call with Hoover. On the same day, Nadeau called Skillman Siewert, a former Peat Marwick partner who had referred Renaissance to Peat Marwick. According to Nadeau’s notes, Siewert said he “believes that the principals involved are reputable and have a high degree of integrity.” Id. at Bates P0000999. At trial, Na-deau testified that after this conversation with Siewert, he had no questions regarding Renaissance’s integrity. Nadeau also talked to a broker dealer named Bob Kovan that day. Although Na-deau’s notes indicate, as a positive sign, that Kovan had made a proposal to act as a manager of the underwriting effort on the St. Andrews offering, they also reflect a somewhat negative tone in Kovan’s comments: Bob [Kovan] said the Renaissance people were “straight” but felt they had limited background in development/syndication. He feels the St. Andrews property is overvalued and this deal is a “pure tax” deal with little economic reality. His review of the Executive deal led him to the conclusion that the rehab costs did not justify the amount of work done. He also told me that AA [Arthur Andersen] & Co had not been paid as yet for the Executive deal (fees were $83,000). Id. at Bates P0001000. At trial, Nadeau testified that he had the impression that Kovan thought Renaissance had a high degree of integrity and that the project had “economic reality.” Nadeau further testified that Renaissance’s limited development background would not prevent it from becoming a client of Peat Marwick’s. Humphries testified that Nadeau’s notes of his talk with Kovan did not raise any “red flags”; rather, Kovan’s comments were only his opinion. Last, Nadeau talked to Marlene Crotts, a commercial real estate lending officer at C & S Bank (now NationsBank). Her comments, as reflected in Nadeau’s notes, were generally positive: On July 23 I contacted Marlene Krotts [sic] of C & S who is the Renaissance account representative. She said the bank has been involved with [the] client for 2 years and has 2 loans currently outstanding, one to the company and one for construction of the Executive Wing Project. She indicated that the loans have a good [payment] history never going [more than] 30 days past due. She said that in her opinion they had a quality product and possessed an unusual capability for renovation type work. The slow pay of AA & Co. on Executive Wing was due to a restrict clause in the loan agreement which will not allow funds to be disbursed until the certificate of occupancy is obtained. She said this would occur in late July. Id. at Bates P0001001. Nadeau testified at trial that he was not disturbed by the “slow pay” to Arthur Andersen; rather, he was satisfied with Crotts’ explanation that Arthur Andersen’s fees would be paid when the Executive Wing escrow broke. Nadeau was further encouraged by Crotts’ apparent satisfaction with Renaissance’s payment history. Nadeau then drafted a file memorandum dated July 25, 1985, summarizing the client evaluation of Renaissance, which Humphries reviewed, revised, and issued in his own name. This memorandum sets forth conclusions regarding Nadeau’s various phone calls: As a summary the third party inquiries indicate that the principals of Renaissance ... have a high degree of integrity and character, but concern was expressed over the client[’]s slow pay experience with the law firm of Hurt, Richardson and the accounting firm of Arthur, Anderson [sic]. Mike Hoover of Hurt, Richardson, who first expressed this concern to me, felt the company had somewhat spread themselves too thin in acquiring numerous properties within the Midtown area to renovate. He indicated they had always paid their bills, but they were paid several months late. However Marlene Krotts [sic] of C & S expressed satisfaction of the payment history of Renaissance. Id. at Bates P0000996. Humphries then concludes that Renaissance would make a good client for Peat Marwick despite some risks relating to fee collection: Based upon the responses received from the third parties contacted and my reaction to visiting with the Company, I am satisfied that Renaissance ... has a good potential to become a strong client of the Atlanta office in both audit and tax. Accordingly, I deemed that no further investigation is required. The client has the ordinary business risk associated with prospective reporting engagements, however these engagements are for compilation of prospective financial information and not reviews or audits thereon which mitigates the potential business risks. We do have exposure for the timely collection of our bills. However, due to the magnitude of the fees involved, and the potential to perform additional like services to this client, this risk seems appropriate for the firm to assume. Id. at Bates P0000997. In carrying out his client evaluation of Renaissance, Nadeau also completed a “Prospective Client Evaluation Background Questionnaire.” In response to the question of why the prospective client was changing accountants, Nadeau wrote: “Prospective client wishes to diversify its relationship with the leading accounting firm. They expressed no dissatisfaction with AA & Co.” Id. at Bates P0001004. The questionnaire directs that inquiries with “key third parties” be made and documented for the file. These inquiries should cover, among other things, an assessment of the integrity of the principals, awareness of any current or possible litigation against the entity or its principals, and the lending history with bankers. Id. at Bates P0001004-P0001005. Although Nadeau’s memoranda of conversation with third parties address the issues of integrity and lending history, there is no documentation of inquiries made concerning current or possible litigation. Attached to the questionnaire is a December 1, 1984 balance sheet of Renaissance, as well as the following statement: The unaudited financial statement of the General Partner at December 1, 1984, reflects a net book value in excess of $1,000,-000 computed on the basis of estimated current fair market values. Such net worth consists almost entirely of interests in other real estate projects, and notes receivable secured by real estate. Consequently, such net worth is substantially illiquid and may not be readily salable to meet any obligations of the General Partner to the Partnership. Id. at P0001008-09. S. Humphries’s Client Evaluation Work At trial, Humphries testified as to several aspects of Nadeau’s investigative work. First, Humphries found it significant that well-respected accounting and law firms had agreed to perform professional services for Renaissance. Second, although he acknowledged that Renaissance’s ability to pay its bills to Peat Marwick was a risk of the engagement, Humphries testified that he thought that this exposure was due mainly to the fact that Renaissance was a new client. Third, Humphries testified that Peat Mar-wick’s fees were not intended to be contingent on the completion of the St. Andrews project, although Renaissance was free to choose the source of funds from which to pay Peat Marwick. Humphries further testified that he followed the “engagement checklist” set forth in the Bulletin. In this checklist, Humphries checked “yes” to the following question: “Has the engagement partner determined, and has the designated industry specialist concurred, that the project does not entail high risk/uncertainty, in contemplation of providing the proposed compilation-type service?” Exh. 1776B at P0010974. At trial, Humphries testified that the St. Andrews project entailed “risk” but not “high risk”; a new client was involved, but Peat Marwick’s market study showed a growing demand for buildings such as the St. Andrews. Humphries also checked “yes” in response to the question of whether the client has a “successful track record in the type of project contemplated.” Id. At trial, Humphries testified that Renaissance had demonstrated its “successful track record” by its completion of the Executive Wing project. Hum-phries also checked “yes” in response to the question of whether the contractor, DICC, had completed “at least one similar project.” Id. At trial, Humphries testified that he was thinking of the Executive Wing project as being the “similar project.” As discussed supra, the evidence at trial showed that, in late July, construction on the Executive Wing had not been completed and the syndication closing proceeds had been tied up in escrow since the closing in December of 1984. The Executive Wing project involved another real estate limited partnership syndication in which Renaissance acted as general partner. In the Executive Wing PPM, the representation was made that Renaissance “anticipates that the renovations will be completed by February 28, 1985.” Exh. 5012 at P0018341. The evidence at trial showed that completion of the Executive Wing construction was delayed considerably beyond this date. The evidence further showed that completion of construction was a condition for the release of the escrow. When escrow finally broke in late September, a significant amount of debts and creditor disputes had accumulated; Renaissance did not receive the profits that it had anticipated would accrue from the Executive Wing project. At trial, Humphries admitted that he read the Executive Wing PPM, including the portion in which construction was projected to be completed by February 28, 1985, and that he did not check why escrow had not broken by July of 1985. Humphries also testified that he took a tour of the Executive Wing with Charles Shirley on August 30, 1985 and was very impressed. 4- Expert Opinions Regarding the Client Evaluation Work At trial, Taylor, plaintiffs’ accounting expert witness, testified that many “danger signs” were contained in Peat Marwick’s pre-engagement client evaluation. For example, Renaissance’s track record, a significant consideration in the client evaluation process, was nearly nonexistent. The only project similar to the St. Andrews and 696 Peachtree projects was the Executive Wing; however, at the time that the client evaluation was being performed by Peat Marwick, escrow had not yet broken due to construction delays. In addition, Taylor testified, the client evaluation showed that Renaissance was unable to pay its bills in July of 1985, the time when the evaluation was carried out. Taylor also concluded that the requisite independence was lacking because Peat Marwick’s fees were dependent on the respective syndication closings. Peat Marwick’s accounting expert witness, Pallais, testified in response to Taylor’s testimony. With respect to Renaissance’s ability to pay its bills, he found, upon review of Peat Marwick’s pre-engagement client evaluation, no suggestion that Renaissance was insolvent. He also noted that no AICPA guideline existed in 1985 that specifically addressed the topic of pre-engagement client investigation. 5. Adequacy of Pre-Engagement Client Evaluation Contrary to plaintiffs’ arguments at trial, the evidence regarding Peat Marwick’s pre-engagement client evaluation fails to show that Peat Marwick had actual knowledge of or was severely reckless as to any fraud being perpetrated by Renaissance. In fact, the evidence fails to show that Renaissance was pursuing any fraudulent scheme at the time when Peat Marwick was deciding whether to accept Renaissance as a client. In addition, the evidence fails to show that Peat Marwick was negligent in carrying out its pre-engagement investigation of Renaissance. Peat Marwick’s pre-engagement client evaluation of Renaissance revealed several items of concern. First, it showed that Renaissance and DICC had very little experience with real estate limited partnership syn-dications but had completed other real estate projects. Second, it showed that construction had not yet been completed on the Executive Wing, which in turn was causing delays in payments and some financial difficulties for Renaissance. Third, it demonstrated some risk that Peat Marwick would not collect its fees from Renaissance. On the positive side, the evaluation showed that Renaissance was actively involved in promising renovation projects. Information revealed by Nadeau’s conversations with one of Renaissance’s attorneys, one of Renaissance’s bankers, and others associated with Renaissance indicated that Renaissance had integrity and the ability to complete the proposed projects. In weighing the client evaluation information, it must be remembered that Peat Mar-wick’s decision to accept Renaissance as a client was a matter of judgment; accordingly, the court cannot draw strict lines to define what was or was not acceptable. As Humphries testified at trial, he recognized that some negative information had been brought to light. However, as engagement partner, he made the decision that such information was overcome by the positive information similarly gained through the evaluation process. For example, although it was probably clear that Renaissance intended to pay Peat Marwick out of its syndication proceeds, that intention does not dictate the conclusion that Peat Marwick lacked independence. In its written representations to Renaissance, Peat Marwick expressly stated that its fees were not contingent on the syndication closings; the possibility that the closings would not occur and Renaissance would not be able to pay Peat Marwick was a risk that Humphries, on behalf of Peat Mar-wick, was willing to assume. In addition, it appears questionable that Renaissance had a “successful track record in the type of project contemplated” or that DICC had “completed at least one project similar in nature to the one proposed.” See Exh. 1776A at Bates P0014004; see also Exh. 924 at Bates P0007616-17. In July of 1985, Renaissance and DICC had completed several other real estate projects, but the Executive Wing project was their first real estate syndication. Although some investigation of the Executive Wing pi’ojeet might have been warranted, it appears that Peat Marwick was operating with the understanding that the project was almost completed. Accordingly, the “track record” requirement, for Peat Marwick’s own purposes, was probably satisfied. Finally, it is somewhat troubling, especially with the benefit of hindsight, that Peat Marwick failed to investigate the possibility of litigation as directed in the Peat Marwick questionnaire. However, the failure to adhere to one procedure recommended in Peat Marwick’s own internal guidelines does not amount to a showing of negligence. After careful consideration of the foregoing, the court finds that Peat Marwick generally followed its internal guidelines for conducting a pre-engagement client investigation. The decision to accept the engagement was made by Humphries after an informed evaluation of the risks associated with Renaissance. Although in retrospect it certainly was not a wise decision to accept the engagement, insufficient evidence exists to find by a preponderance of the evidence that Peat Marwick was negligent in doing so or that Peat Marwick should have been alerted to any fraud contemplated or being perpetrated by Renaissance from information revealed during the client evaluation process. B. Peat Marwick’s Engagements 1. The St Andrews Compilation Engagement After completing their client evaluation of Renaissance, Peat Marwick accepted the engagement to perform a “compilation” service, with the understanding that its compilation report would be included in the St. Andrews PPM used to solicit sales of limited partnership interests in the St. Andrews limited partnership. In a formal engagement letter, Peat Marwick wrote to Renaissance: This letter is to confirm our understanding of the terms and objectives of our engagement and the nature and limitations of the services we will provide. We will compile, from information management provides, certain prospective financial information relating to the Saint Andrews Associates, Ltd. for the period September 1, 1985 to December 31, 1985, and the years ending 1986 to 1995. We will not express any form of assurance on the achievability of the projections or reasonableness of the underlying assumptions. We have no responsibility to update our report [with] events and circumstances occurring after the date of such report. It is ... understood that in accepting this proposal, the fees and the payment thereof are not contingent upon either the results of the work performed or syndication closing. Exh. 80,243 at Bates P0010939-40. On July 24, 1985, Shirley accepted the terms of this engagement letter. See id. The Peat Marwick Bulletin describes the compilation service as follows: This compilation-type service entails a limited-scope engagement requiring that we satisfy ourselves that the client’s projection assumptions are not unreasonable, and results in a report (which may be included in a private placement memorandum of a limited partnership) that disclaims an opinion on the reasonableness of such assumptions. Exh. 1776A at Bates P0014002. In satisfying themselves' that the assumptions are not unreasonable, the accountants must base their conclusion on “available information, client-supplied documentation, [their] knowledge of the industry, operating practices and financial structure for the. type of project proposed, income tax matters, and the specific market in which the proposed project is to compete.” Id. at Bates P0014003. In addition, if circumstances so require, the accountants should (1) assist the client in assembling the projected financial statement based upon the client’s assumptions; (2) assist the client in formulating assumptions disclosure language; and (3) advise the client on taxation matters. Id. at Bates P001400. At trial, Humphries testified regarding the work performed on the St. Andrews compilation engagement. In accordance with the engagement checklist, see Exh. 1776B at Bates P0010973, Humphries testified, Peat Marwick assisted the client in formulating disclosure language, formulating assumptions disclosure, and revising the projections and assumptions disclosure. Michael Plummer, a real estate management consultant, visited the construction site and reported on construction-related matters. On September 5, 1985, Humphries and Philip Cook, a Peat Marwick audit manager who worked on the St. Andrews engagement, signed off on the engagement checklist. Theodore Wierbowk-si, another Peat Marwick accountant, performed “second partner review” for the St. Andrews project. 2. The St. Andrews Review Engagement After completing its work on the St. Andrews engagement, Peat Marwick issued a compilation report dated August 22, 1985 for inclusion in the St. Andrews PPM, which was dated August 28, 1985. Subsequently, on or about September 10, 1985, Humphries learned that the St. Andrews engagement needed to be upgraded to a review because of certain requirements under the laws of Pennsylvania, a state in which St. Andrews limited partnership interests were to be offered. See Exh. 901 (Humphries’s notes of Sept. 10, 1985 telephone call with securities attorney Alan Rabinowitz; “Need a ‘Review Type’ letter”); Exh. 902 (Humphries’s notes of Sept. 10, 1985 telephone call with Shirley; “Penn, law requires a minimum of a ‘review’ ”). Accordingly, Peat Marwick expanded the scope of its work so that it could issue a “review” report. In doing so, Peat Marwick issued a formal engagement letter dated September 10,1985, in which Humphries represented to Shirley: We are writing this letter to confirm the scope of our review of certain prospective financial information prepared by your staff relating to St. Andrews Associates, Ltd., a limited partnership formed to purchase, rehabilitate, hold for investment and resale a corporate rental apartment facility in Midtown Atlanta, Georgia. Our review and our report thereon will supplement our compilation report previously issued and dated August 22, 1985. The objective of our review will be to issue our report as to whether, based on our review, we believe that the prospective data was prepared using assumptions which were reasonable. ... Generally, we will consider whether the assumptions appear to be reasonable in light of the Company’s past experience and of information obtained during the review, and whether individual assumptions are consistent with o