delivered the opinion of the Court.
In the mid-1990s, two officers of a corporation intentionally misrepresented details concerning the corporation’s financial status to an independent auditing firm. That firm in turn failed to detect those misrepresentations for several years. After subsequent audits revealed the officers’ fraud, the corporation was forced to acknowledge previously unreported losses of tens of millions of dollars and to declare bankruptcy. A litigation trust, acting as the corporation’s successor-in-interest and representing the corporation’s shareholders, filed suit against the auditor for negligently conducting the audit. The trial court granted the auditor’s motion to dismiss based on the imputation doctrine, which holds that knowledge of an agent generally is attributed to its principal. The trial court concluded that the fraud was imputable to the litigation trust, as the corporation’s successor, and that the litigation trust cannot sue the auditor unless the auditor intentionally and “materiaiPy] participat[ed]” in the fraud. The Appellate Division reversed, concluding that the trust’s complaint alleged sufficient facts to support an equitable fraud claim against the auditor.
In this matter, we therefore must decide whether the imputation doctrine bars the litigation trust’s action. We hold that the imputation doctrine does not bar corporate shareholders from recovering through a litigation trust against an auditor who was negligent within the scope of its engagement by failing to uncover or report the fraud of corporate officers and directors. Imputation, however, may be raised as a defense by auditors to bar such claims against corporate shareholders who engaged in or were aware of the wrongdoing of corporate agents. In light of our holding, and for the reasons set forth below, we affirm the Appellate Division decision, as modified, and remand this matter to the trial court for reinstatement of the complaint.
*358I.
A.
Physician Computer Network, Inc. (PCN), a publicly traded New Jersey corporation with offices in Morris Plains, was engaged in the business of developing and marketing software to assist doctors in communicating with hospitals, insurers, laboratories, and group health care providers. From mid-1993 until mid-1998, PCN retained defendant KPMG LLP, an international accounting firm with a regional office in Short Hills, as its independent auditor. During that time, two PCN officers, John Mortell and Thomas Wraback, served as the primary contacts with KPMG. John Mortell was a director of PCN during all relevant times and PCN’s President from January 1998 until March 1998, when he was removed from his position. Mortell also served as the corporation’s Chief Financial Officer from May 1992 to March 1995 and as its Executive Vice President and Chief Operating Officer from March 1995 to December 1997. Thomas Wraback was PCN’s Senior Vice President and Chief Financial Officer from September 1996 until August 1998, when PCN terminated his employment.
During the mid-to-late 1990s, Mortell and Wraback orchestrated a series of fraudulent transactions to inflate PCN’s reported revenues and reduce its reported expenses. On April 1, 1996, PCN filed its annual report on Form 10-K with the Securities and Exchange Commission (SEC) for the fiscal year ending on December 31, 1995. In that filing, PCN reported revenues of over $41 million for 1995, a 104% increase over revenues of approximately $20 million in 1994, and a 584% increase over revenues of approximately $6 million in 1993. Despite that increase, the corporation also reported a net loss before extraordinary items of over $11 million. The 1995 financial statements were accompanied by an unqualified audit opinion by KPMG directed to PCN’s Board and stockholders, stating:
We have audited the consolidated financial statements of the Physician Computer Network, Inc. and subsidiaries as of December 31, 1995 and 1994, and the *359related consolidated statements of operations, changes in shareholders’ equity (deficiency), and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Physician Computer Network, Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, and in all material respects, the information set forth therein.
The following day, April 2, 1996, PCN issued a press release announcing that it had filed a registration statement and prospectus with the SEC to offer seven million shares of PCN’s common stock for sale to the public. PCN later filed an amended statement with the SEC, lowering that amount to 5.6 million shares. With KPMG’s express consent, each SEC registration statement and prospectus included a copy of the corporation’s audited financial statements for 1995 and KPMG’s accompanying audit report.
Two months later, PCN issued another press release, this time announcing that PCN had signed an agreement with WismerMartin Inc., another provider of practice management systems, for PCN to acquire that company, by merger, subject to WismerMartin shareholder approval. The agreement provided that PCN was to obtain all of Wismer-Martin’s issued and outstanding stock in exchange for approximately $2 million in cash and 935,000 shares of PCN common stock. In connection with that merger, PCN filed a form S-4 registration statement with the SEC, which, with the express consent of KPMG, included PCN’s audited *360financial statements for 1995 and KPMG’s corresponding audit report. Wismer-Martin merged with PCN in September 1996.
In 1997, PCN filed its annual report for 1996 with the SEC, which included its audited financial statements for the year ending on December 31,1996, and an unqualified audit opinion by KPMG, stating that KPMG’s audit was conducted in accordance with Generally Accepted Auditing Standards (GAAS) and Generally Accepted Accounting Principles (GAAP). According to those financial statements, PCN’s 1996 revenues were almost $96 million, more than double that of 1995. Throughout 1997, PCN continued to report increased revenues and income as compared to corresponding periods in the prior year.
During the course of its audit work for the fiscal year ending on December 31, 1997, KPMG discovered several accounting irregularities. In February 1998, KPMG raised those concerns with Mortell, Wraback, and PCN’s outside counsel. As a result, on March 3, 1998, the corporation issued a press release announcing that it would restate its previously reported financial results for each of the first three quarters of 1997 and instead report a loss from operations for each of those quarters. The corporation also announced that it would report a loss for the fourth quarter of 1997, yielding a total expected loss of between $27 and $31 million for the year. In that same announcement, the corporation stated that Mortell had “taken a temporary leave of absence” pending completion of the corporation’s 1997 audit. Following those disclosures, the price of PCN stock fell seventy percent, hitting a record low.
In April 1998, PCN announced both that KPMG was withdrawing its auditor’s report for 1996 and that PCN had appointed a Special Committee of its Board to conduct an investigation into the matter. From April 1998 to June 1998, KPMG continued its audit procedures and found additional irregularities in the 1996 consolidated statements. At the end of August, PCN filed a Form 8-K with the SEC, disclosing that KPMG had withdrawn its audit opinion for the 1994 and 1995 fiscal years and had discovered that *361the financial statements for the 1995 and 1996 fiscal years would need to be restated. PCN also disclosed that KPMG was no longer acting as independent auditor for the corporation, although the parties dispute whether PCN dismissed KPMG or KPMG resigned. PCN subsequently retained the accounting firm of Arthur Anderson to complete the audit of its 1997 financial statements and to restate its fiscal results for 1995 and 1996.
The effect of PCN’s announcements and disclosures was disastrous for the corporation. Thereafter, PCN continually operated at a cash flow deficit and was in default on its bank debt. The corporation ultimately filed a petition for bankruptcy on December 7, 1999. As part of the bankruptcy plan, the corporation’s assets were acquired by Medical Manager Corporation. PCN no longer operates as a public corporation.
B.
Beginning in 1998, several class action lawsuits were filed against PCN on behalf of various shareholder groups and consolidated in the United States District Court for the District of New Jersey. The consolidated action, which eventually settled for $21,150,000, was comprised of persons who purchased or otherwise acquired PCN common stock from February 1996 to April 1998. The settlement expressly denoted that it did not preclude claims against KPMG, Mortell, or Wraback. Nine months later, the same group settled their claims against Mortell and Wraback for $45,000, to “be used to fund the investigation and prosecution of claims the Class may have against KPMG.”
Then, in 2001, a class of plaintiffs, consisting of shareholders for the period of April 1996 through April 1998, filed suit against KPMG in the United States District Court for the District of New Jersey. The complaint alleged securities fraud violations under Section 10(b) of the Securities Exchange Act of 1934 in connection with KPMG’s 1995 and 1996 audits and Section 11 of the Securities Act of 1933 in connection with the 1995 audit. KPMG filed a motion to dismiss. In an unpublished opinion, Judge Dickinson *362Debevoise dismissed the plaintiffs’ claims with prejudice, finding that they had failed to state a claim and failed to plead fraud with particularity.
In 2002, the SEC filed a complaint in the United States District Court for the District of Columbia, charging six former officers and managers of PCN, including Mortell and Wraback, with accounting fraud. The SEC also filed a notice of settlement, indicating that all defendants had consented to the entry of “a permanent injunction enjoining [each person] from violating or aiding or abetting violations of the anti-fraud, periodic reporting, record-keeping, internal controls and lying to the auditors provisions of the federal securities laws.” As part of the settlement, Mortell agreed to be permanently barred from acting as an officer or director of a public company, and Wraback agreed to be barred for ten years.
C.
The present action against KPMG was filed in May 2002 by plaintiff NCP Litigation Trust (Trust). The Trust was created pursuant to PCN’s confirmed bankruptcy plan, approved by the United States Bankruptcy Court for the District of New Jersey. The formal agreement creating the Trust provides:
[T]he Debtors [PCN and related entities] have agreed to contribute to the Litigation Trustee in trust ... all of their interests in any Causes of Action (the “Litigation Claims”) ... [and] have requested that the Litigation Trustee enforce the Litigation Claims, if any, for the benefit of all holders of Allowed Class 7B Equity Interests____
The record reflects that the term “Allowed Class 7B Equity Interests” refers to shareholders of the debtor corporation.
The Trust’s amended complaint alleges that KPMG committed negligence, negligent misrepresentation, breach of contract, and breach of fiduciary duty. As part of those allegations, the Trust asserts that KPMG failed to perform its audits in conformity with GAAS and GAAP, the professional guidelines that auditors must adhere to while conducting an audit. In essence, the Trust claims that
*363KPMG negligently failed to exercise due professional care in the performance of its audits and in the preparation of the financial statements and audit reports. Had KPMG not performed negligently, and had it instead exercised due care, it would have detected PCN’s fraud and prevented the losses PCN sufiered.1
According to the Trust, PCN’s 1995 financial records, which KPMG certified, were in such disarray that the successor auditor, Arthur Anderson, was unable to reconstitute them. The Trust also cites an investigation by the Special Committee of PCN’s Board that found that the corporation’s 1995 fiscal results had been overstated. PCN’s 1996 financial records also are alleged to have suffered from substantial irregularities. For example, KPMG purportedly failed to verify PCN’s receipt and deposit of a $3.5 million check that was part of a fraudulent asset purchase arranged by Mortell and Wraback. According to the Trust, a simple examination of PCN’s bank records would have revealed that this amount—the largest single source of PCN’s 1996 income—was never deposited. KPMG also allegedly allowed for the improper reversal of an approximate $1.8 million liability, thereby offsetting an increase in PCN’s accounts receivable reserve, even though “KPMG knew that the reversal of [that] obligation was not supported by GAAP.”
The complaint further alleges that KPMG failed to discover PCN’s improper recognition of income on its software maintenance agreements. Specifically, PCN entered into maintenance service contracts with its software customers that required customers to pay the fees for the entire maintenance contract when the contract was executed. The Trust alleges that KPMG neglected to comply with GAAP because, although PCN received payment up front for the full amount of the maintenance contracts, GAAP requires that revenue be recognized over time as the services are provided, not at the time of the initial sale. As a result, PCN reported nearly $1.5 million in 1996 that was not actually earned until 1997. The Trust also maintains that KPMG *364violated GAAS by failing to require PCN to accrue liabilities of approximately $1.5 million in vacation and bonus pay expenses, which were incurred in 1996 but that would not be paid until the following year.
Finally, the complaint asserts that individual audit team members were distracted and deficient in the performance of their duties:
The KPMG audit team assembled for the 1996 audit was not a strong one. Upon information and belief, the partner on the PCN audit for years was distracted by another client which was having substantial trouble which required him to spend a lot of time away from PCN during the audit. The audit manager was new to the PCN audit and was therefore unfamiliar with the Company. Also, the audit senior, who was also new to the PCN audit, was so preoccupied about leaving KPMG to attend law school that he spent substantial time asking Wrabaek about apartment-hunting in New York rather than performing the necessary audit work; his audit work suffered as a result.
KPMG moved to dismiss, contending that the fraud of Mortell and Wrabaek, as agents of PCN, should be imputed to the Trust, as PCN’s successor-in-interest, thereby barring the Trust’s action against KPMG. The trial court agreed and granted the motion. The court reasoned that to defeat the imputation defense the Trust would have to show “that there has been a material participation by the third party, a material form of culpability.” After reviewing the record, the court concluded that it found “no evidence of any material fault, accounting irregularity, [or] participation of the defendants in the fraudulent conduct of these senior participants that would in any way be deemed sufficient to estop the rule of imputation as the case was in [In re Integrity Insurance Co., 240 N.J.Super. 480, 573 A.2d 928 (App.Div.1990),]” New Jersey’s only decision addressing application of the imputation defense in the corporate auditing context.
In an unreported decision, the Appellate Division reversed in part, concluding that “Integrity supports the sufficiency of [the Trust’s] complaint.” In the panel’s view, “[n]egligence, negligent misrepresentation, and breach of contract, as well as legal fraud, surely can be culpable conduct that ‘contributed to the misconduct of another.’ ” As such, the Appellate Division found that “[t]he *365trial court read Integrity too narrowly when it essentially held that only legal fraud by the third party would constitute sufficiently culpable conduct to defeat the imputation defense.” The panel concluded that the imputation defense was not available to KPMG because the Trust’s complaint, fairly read, alleges that KPMG committed equitable fraud independent of any legal fraud committed by PCN’s officers. The panel, however, upheld the trial court’s dismissal of the Trust’s claim for breach of fiduciary duty.
KPMG appealed, and we granted certification. 181 N.J. 286, 854 A.2d 919 (2004). We also granted amicus curiae status to the American Institute of Certified Public Accountants and to the New Jersey Society of Certified Public Accountants.
II.
At the outset, we observe that this matter is before us on a Rule 4:6-2(e) motion to dismiss. On such motions, a trial court should grant a dismissal “in only the rarest of instances.” Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 772, 563 A.2d 31 (1989). A court’s review of a complaint is to be “undertaken with a generous and hospitable approach,” id. at 746, 563 A.2d 31, and the court should assume that the nonmovant’s allegations are true and give that party the benefit of all reasonable inferences, Smith v. SBC Communications Inc., 178 N.J. 265, 282, 839 A.2d 850 (2004). If “the fundament of a cause of action may be gleaned even from an obscure statement of claim,” then the complaint should survive this preliminary stage. Craig v. Suburban Cablevision, Inc., 140 N.J. 623, 626, 660 A.2d 505 (1995) (citation omitted).
The liberal standard that governs a motion to dismiss has particular relevance to imputation cases because “[d]eciding whether to permit an auditor to utilize imputation requires a detailed factual analysis of the dispute.” Maureen Mulligan et al., Recent Developments in the Law Affecting Professionals, Officers, and Directors, 36 Tort & Ins. L.J. 519, 535 (2001). Consequently, many courts have held that the applicability of the imputation *366defense to a particular case cannot be determined on a motion to dismiss or on a motion for summary judgment. See, e.g., In re Crazy Eddie Sec. Litig., 802 F.Supp. 804, 817-18 (E.D.N.Y.1992) (denying motion to dismiss because “resolution of the [imputation] issue must await trial”); In re Sec. Investor Prot. Corp. v. R.D. Kushnir & Co., 274 B.R. 768, 782 (Bkrtcy.N.D.Ill.2002) (concluding availability of imputation defense requires fact intensive review of record and thus should be determined at trial); In re Wedtech Sec. Litig., 138 B.R. 5, 9-10 (S.D.N.Y.1992) (denying summary judgment on application of imputation defense); First Nat’l Bank v. Brumleve & Dabbs, 183 Ill.App.3d 987, 994-95, 132 Ill.Dec. 314, 318, 539 N.E.2d 877, 881 (1989) (concluding that trial court erred in relying on imputation defense during motion to dismiss).
III.
The imputation doctrine is derived from common law rules of agency relating to the legal relationship among principals, agents, and third parties. Pursuant to those common law rules, a principal is deemed to know facts that are known to its agent. Restatement (Third) of Agency § 5.03 (Tentative Draft No. 6, 2005) (“[N]otice of a fact that an agent knows or has reason to know is imputed to the principal if knowledge of that fact is material to the agent’s duties to the principal.”). Courts have used interchangeable terms to express this legal rule with some describing the principal as “imputed” with the agent’s knowledge, Hercules Powder Co. v. Nieratko, 113 N.J.L. 195, 199, 173 A. 606 (Ch.Ct.1934), and others stating that the principal has “constructive knowledge,” Hollingsworth v. Lederer, 125 N.J.Eq. 193, 206, 4 A.2d 291 (E. & A.1939) (per curiam), or “constructive notice,” Integrity, supra, 240 N.J.Super. at 506, 573 A.2d 928, of the agent’s knowledge. See also post (using terms interchangeably). Regardless of the terminology, the purpose of the doctrine is the same—to protect innocent third parties with whom an agent deals on the principal’s behalf. See Nischne v. Firestone Tire & Rubber Co., 116 N.J.Eq. 305, 308, 173 A. 341 (Ch.Ct.1934) (“The rule of *367implied notice is invoeable to protect the innocent, never to promote an injustice.”). Principals thereby are prevented “from obtaining benefits through their agents while avoiding the consequences of agent misdeeds.” Andrew J. Morris, Clarifying the Imputation Doctrine: Charging Audit Clients with Responsibility for Unauthorized Audit Interference, 2001 Colum. Bus. L.Rev. 339, 350 (2001).
Under the doctrine, a third party may invoke imputation as a defense against a principal seeking to enforce an agreement when the principal’s agent fraudulently induced the third party to enter into that agreement. In other words, an agent’s fraud is imputed to a principal, thereby barring the principal from suing the third party. See Gordon v. Cont’l Cas. Co., 319 Pa. 555, 181 A. 574, 578 (1935) (“A principal who sues to enforce a contract is bound by the representations made by his agent, in order to induce the opposite party to make it.”) (citation omitted). Courts have found that it is unfair to allow a principal to enforce an agreement in such a situation, even when both the principal and the third party have acted in good faith. The party who selected the agent—the principal—should bear the loss stemming from the agent’s misconduct. Ibid.
Imputing an agent’s actions and knowledge to the principal serves several salutary purposes. By allocating the risk of injury to the principal, the imputation doctrine “creates incentives for a principal to choose agents carefully and to use care in delegating functions to them.” Restatement (Third) of Agency, supra, § 5.03 cmt. b. Because the principal cannot avoid responsibility through ignorance, imputation also “encourages a principal to develop effective procedures for the transmission of material facts, while discouraging practices that isolate the principal or co-agents from facts known to an agent.” Ibid. Moreover, third parties who are aware that the principal is ultimately accountable for its agent’s actions and representations are more likely to conduct business through an agent.
*368However, the rationale for imputation in a simple principal-agent relationship begins to break down in the context of a corporate audit where the allocation of risk and liability among principals, agents, and third parties becomes more complicated. As noted, this matter involves corporate officers who, as agents of the corporation, committed accounting fraud, and a third-party auditor that allegedly was negligent in failing to discover the resulting inaccuracies in the financial records. If the officers’ wrongful conduct is imputed to the corporation, the corporation itself can be said to have committed the fraud. Further, the wrongdoing also may be imputed to the corporation’s successor-in-interest who then would be estopped from suing the allegedly negligent third-party auditor.
Such an application of the imputation defense has been criticized, however, because “agency doctrines ... operate on an all- or-nothing basis.” Deborah A. DeMott, When is a Principal Charged with an Agent’s Knowledge, 13 Duke J. Comp. & Int’l L. 291, 319 (2003). That is, the negligent auditor either faces total liability or none. Morris, supra, 2001 Colum. Bus. L.Rev. at 353 (“As a device for assigning responsibility, [imputation] is unforgivingly binary.”). Those disparate results seem “severe and unmodulated by concern for the specifics of individual cases.” Demott, supra, 13 Duke J. Comp. & Int’l L. at 319. Absolving negligent corporate auditors “is difficult to rationalize and to justify or explain in any satisfying or comprehensive way.” Id. at 291 (citation omitted). As a result, “courts have struggled to determine what circumstances permit an auditor to invoke this defense.” Mulligan, supra, 36 Tort & Ins. L.J. at 533.
IV.
With that background as our guide, we turn to the issue in this appeal—whether the imputation doctrine bars the Trust, representing shareholders of PCN, from bringing suit against the corporation’s auditor for its alleged negligence in failing to detect the fraud of PCN’s directors and officers.
*369KPMG argues that the Trust should be barred by the imputation doctrine under both this jurisdiction’s prior decision in Integrity, supra, 240 N.J.Super. 480, 573 A.2d 928, and the Seventh Circuit’s decision in Cenco, Inc. v. Seidman & Seidman, 686 F. 2d 449 (7th Cir.), cert. denied, 459 U.S. 880, 103 S.Ct. 177, 74 L.Ed.2d 145 (1982). KPMG first claims that under Integrity—the only decision to address this issue in New Jersey—the imputation defense bars all claims against a corporate auditor unless a plaintiff alleges that the auditor was an active and knowing participant in the fraud. Here, because the Trust does not allege active participation on the part of KPMG, KPMG contends that the imputation defense bars the Trust’s claims. The Trust responds that Integrity is not limited to “active participation,” but rather, allows a claim by a corporation’s successor-in-interest against third-party auditors if the auditor “contributed to” the underlying misconduct. Alternatively, KPMG argues that because the Trust represents the shareholders of PCN, the Court should follow the Seventh Circuit’s decision in Cenco and hold that tort principles require that the imputation doctrine bars the Trust’s suit. The Trust counters that because imputation is a state law issue, this Court should rely on New Jersey jurisprudence.
Those arguments require that we consider whether this State’s jurisprudence permits the Trust to maintain an action for negligence. Because the Trust represents shareholders of PCN, we also must determine whether to follow Cenco and hold that the imputation doctrine bars suit on behalf of shareholders.
Y.
A.
The Supreme Court teaches that the application of the imputation doctrine is a matter of state law. O’Melveny & Myers v. FDIC, 512 U.S. 79, 83-85, 114 S.Ct. 2048, 2052-54, 129 L.Ed.2d 67, 72-74 (1994). As indicated above, the only New Jersey decision to consider whether the imputation doctrine applies in the corporate *370auditing context is Integrity. In that case, an insurance company became insolvent after alleged mismanagement and fraud by the company’s directors and officers. Integrity, supra, 240 N.J.Super. at 485-87, 573 A.2d 928. A liquidator was appointed to seek recovery “on behalf of the creditors, policyholders or shareholders” of the failed insurance company. Id. at 486, 573 A.2d 928. The liquidator sued the insurance company and its directors and officers for fraudulently “coneeal[ing] the company’s true economic condition by preparing and disseminating materially false financial statements” that, in turn, resulted in insolvency. Id. at 487-88, 573 A.2d 928. The liquidator also sued the company’s auditor, alleging that it negligently failed to discover the fraud and enabled managerial misconduct to bankrupt the company. Id. at 487, 573 A.2d 928. Specifically, the liquidator asserted claims against the auditor for malpractice, negligence, negligent misrepresentation, gross negligence, recklessness, fraud, aiding and abetting fraud, and for violations of New Jersey’s anti-racketeering and consumer fraud statutes. Ibid. According to the complaint,
as a result of mismanagement and fraud, the [defendant officers and directors] caused Integrity to become statutorily insolvent ... and then, with the active participation of [the auditor], concealed the company’s true economic condition by preparing and disseminating materially false financial statements.
[Id. at 488, 573 A.2d 928.]
In response, the auditor argued that “any knowledge by the individual defendant officers and directors must be imputed to [the insurance company] as a corporation,” and, therefore, the liquidator’s action should be barred by the imputation defense. Id. at 505, 573 A.2d 928. The Appellate Division rejected that argument and disallowed the imputation defense, explaining that “‘[t]he doctrine of constructive notice to the principal is not available’ to one who contributed to the misconduct sought to be imputed.” Id. at 506, 573 A.2d 928 (quoting Nischne, supra, 116 N.J.Eq. at 308, 173 A 341). Consequently, the court determined that the accountant’s “culpability, if established, would estop it from raising the defense of imputation.” Ibid. The panel reasoned that the auditor should not be able to avoid responsibility for its own misdeeds because imputation “is invocable to protect the innocent, *371never to promote an injustice.” Ibid, (quoting Nischne, supra, 116 N.J.Eq. at 308, 173 A. 341).
In this matter, although we reach the same conclusion as the Appellate Division—that Integrity permits the Trust’s claims—we do not adopt the panel’s reasoning, which was based on equitable fraud. Instead, we reject KPMG’s assertion that Integrity stands for the proposition that only an auditor who actively participated in the corporate fraud can be barred from raising the imputation defense. Although the complaint in Integrity alleged that the defendant auditors had “aetive[ly] participat[ed],” id. at 488, 573 A.2d 928, in concealing the corporation’s true economic state, negligence and fraud claims had been brought as well, id. at 488, 573 A.2d 928. In finding that imputation did not bar the liquidator’s claims, the court drew no distinction between negligent conduct on the one hand and fraudulent conduct on the other. See id. at 506-07, 573 A.2d 928. Further, in its holding the panel was careful not to establish “active participation” as the standard, but instead stated that the defense is not available “to one who contributed to the misconduct.” Id at 506, 573 A.2d 928.
B.
The dissent states that under our holding, “for all practical purposes, the imputation defense ... no longer exists.” Post at 395, 901 A.2d at 897. That is simply not the case. As noted, the imputation defense exists to protect innocent third parties from being sued by corporations whose agents have engaged in malfeasant behavior against those third parties. See Nischne, supra, 116 N.J. Eq. at 308, 173 A. 341. Accordingly, the imputation defense properly applies to prevent suits by a principal against a third party in instances where an agent of the principal has defrauded the third party. Compare Hollingsworth, supra, 125 N.J.Eq. at 211, 4 A.2d 291 (“If any ... agent acting within the general scope of his powers acquires knowledge of a particular fact while committing a fraud upon a third person in a matter pertaining to the business of the corporation ... the corporation *372will be imputable with such knowledge, as well as with knowledge of the fraud----” (citations and quotation marks omitted)), with Hickman v. Green, 123 Mo. 165, 27 S.W. 440, 443 (1894) (‘When the agent is in collusion -with a third person to defraud the principal, the latter will not be responsible for the knowledge of the agent in relation to such fraud.”). Our holding does nothing to change that rule.
However, this matter does not present the typical circumstance for which the imputation defense was designed because PCN’s agents did not directly defraud an innocent third party. They defrauded the corporation and its creditors instead. In that respect, KPMG is not a victim of the fraud in need of protection. Further, KPMG had an independent contractual obligation, at a level defined by its agreement with PCN, to detect the fraud, which it allegedly failed to do. Allowing KPMG to avoid liability for its allegedly negligent conduct would not promote the purpose of the imputation doctrine—to protect the innocent. Therefore, by not extending the imputation doctrine to this context, we do not eviscerate it, as the dissent argues, but rather, we refuse to stretch it to its breaking point. Cf. In re Jack Greenberg, Inc., 240 B.R. 486, 508 (Bankr.E.D.Pa.1999) (“[Wjhile the imputation doctrine may be applied in auditor liability cases, the doctrine was not crafted with that purpose in mind.”).
In sum, we hold that the Trust’s suit is not barred because one who contributed to the misconduct cannot invoke imputation. We therefore conclude that a claim for negligence may be brought on behalf of a corporation against the corporation’s allegedly negligent third-party auditors for damages proximately caused by that negligence.2
*373VI.
We turn our attention from the question whether a claim for negligence against an auditor can be brought to the issue of who may bring that claim. For the reasons expressed below, we hold that in this case the Trust, as the representative of PCN’s shareholders, may bring this action.
A.
The seminal case on the issue is Cenco, supra, in which the Seventh Circuit, interpreting Illinois law, held that allegedly negligent auditors could invoke imputation as a defense when corporate management committed fraud that benefited the corporation. 686 F.2d at 456. In that case, the corporation’s highest-level managers intentionally over-reported the value of inventory, artificially inflating the corporation’s stock price and enabling it to borrow money at unjustifiably low rates. Id. at 451. The independent auditor either failed to uncover the fraud or failed to report it. Ibid. When the fraud was finally detected, the corporation’s stock price plummeted, and a class of shareholders sued the corporation, its managers, and the auditor for securities violations, fraud, and negligence. Ibid.
The Seventh Circuit rejected the “extreme position” that an employee’s fraud is always attributable to the corporation, reasoning that such a position “would exonerate auditors from all liability for failing to detect and prevent frauds by employees of the audited company.” Id. at 454. “Auditors are not detectives hired to ferret out fraud, but if they chance on signs of fraud they may not avert their eyes—they must investigate.” Ibid. In deciding whether imputation should bar the shareholder suit, the court looked to tort law principles, rather than to rules of agency, because tort law is designed to “compensate the victims of wrongdoing and to deter future wrongdoing.” Id. at 455. Applying those principles, the court determined that a judgment in favor of the corporation would be “perverse from the standpoint of compensating the victims of [the] wrongdoing,” because the culpable *374corporate officers owned stock and would receive a pro rata share of compensation from the auditor. Ibid. In addition, the court denied relief because other investors who held stock during the officers’ fraudulent activity, although “innocent in a sense,” were responsible for electing the board of directors that managed the corporation during the fraud. Ibid.
Turning to considerations of deterrence, the Seventh Circuit recognized that auditor liability would create an incentive for auditors to be “more diligent and honest in the future.” Ibid. Nonetheless, considering the question in the context of a contributory negligence framework, which applied in Illinois at the time, the court found that shareholders of a corrupt enterprise should not be allowed to shift the entire responsibility for fraud to the auditor because “their incentives to hire honest managers and monitor their behavior will be reduced.” Ibid. The court refused to permit the company to recover because, during the fraud, the corporation had large corporate shareholders who were in a position to watch over the firm’s operations but who “were slipshod in their oversight.” Id. at 456.
Finally, the court examined whether the fraudulent acts of management benefited or harmed the corporation. Ibid. The court stated:
Fraud on behalf of a corporation is not the same thing as fraud against it. Fraud against the corporation usually hurts just the corporation; the stockholders are the principal if not only victims; their equities vis-á-vis a careless or reckless auditor are therefore strong. But the stockholders of a corporation whose officers commit fraud for the benefit of the corporation are beneficiaries of the fraud.
[Ibid.]
Concluding that the malfeasant acts of management were for the benefit of the company, the court barred the corporation’s suit against the auditor. Ibid.
One year later, in Schacht v. Brown, 711 F. 2d 1343 (7th Cir.), cert. denied, 464 U.S. 1002, 104 S.Ct. 509, 78 L.Ed.2d 698 (1983), the same circuit revisited the issue of auditor liability and reached a different result. In Schacht, the officers and directors of an insurance corporation allegedly arranged a fraudulent scheme to *375issue “extraordinarily high-risk insurance” policies without retaining sufficient funds to cover possible claims. Id. at 1345. When the corporation became insolvent, a liquidator was appointed to manage its affairs and to initiate any actions belonging to the bankruptcy estate. Id. at 1346. The liquidator eventually sued the auditor for negligently failing to discover the fraud. Ibid. Citing Cenco, the auditor argued that the liquidator, as the corporation’s successor-in-interest, “stand[s] in the shoes” of the corporation and only can advance those claims that the corporation could advance directly. Ibid. Therefore, the corporate agents’ fraud was imputable to the liquidator in the same way that it was imputable to the corporation. Ibid. The auditor also contended that the corporate agents’ fraud benefited the corporation by enabling it to remain in business, even though the corporation was “past the point of insolvency.” Id. at 1348.
The Seventh Circuit rejected the auditor’s reliance on Cenco, finding Cenco factually distinct from the case at bar. The court first rejected the argument that the fraud benefited the corporation, explaining that
the fact that [the corporation’s] existence may have been artificially prolonged pales in comparison with the real damage allegedly inflicted by the diminution of its assets and income____We do not believe that such a Pyrrhic “benefit” to [the corporation] is sufficient to even trigger the Cenco analysis which seeks to determine the propriety of imputing to the corporation the directors’ knowledge of fraud.
[Ibid.']
The Schacht court also found Cenco distinguishable on its facts. In Cenco, any recovery from the auditors would have benefited the corporation’s shareholders, whereas in Schacht any recovery would benefit the corporation’s creditors and policyholders. Ibid. The court explained that in “Cenco, we undertook a two-pronged analysis to determine whether ... imputation should occur: whether a judgment in favor of the plaintiff corporation would properly compensate the victims of the wrongdoing, and whether such recovery would deter future wrongdoing.” Ibid. First, the court found that any recovery would compensate only the victims of the wrongdoing because the creditors and policyholders were *376“entirely innocent parties.” Ibid. The court also found no evidence that the wrongdoing officers of the corporation would benefit from a successful recovery against the auditor, thus avoiding the “ ‘perverse’ compensation pattern” that the court found objectionable in Cenco. Ibid, (quoting Cenco, supra, 686 F.2d at 455). Second, addressing deterrence, the court determined that because the shareholders would be the last to recover under the liquidation statute, “permitting recovery in this case would not send unqualified signals to shareholders that they need not be alert to managerial fraud since they may later recover fall indemnification for that fraud from third party participants.” Id. at 1349.
Following in the footsteps of Schacht, other jurisdictions have distinguished Cenco and not applied the imputation defense in cases in which recovery against allegedly negligent third parties would inure to the benefit of creditors of the insolvent corporation. See, e.g., In re Phar-Mor, Inc. Sec. Litig., 900 F.Supp. 784, 787 (W.D.Pa.1995) (rejecting application of imputation defense in summary judgment motion against auditors for negligence, misrepresentation, outrageous conduct and breach of contract when any recovery under litigation trust would “inure to the benefit of the secured and unsecured creditors having an interest in the trust”); Welt v. Sirmans, 3 F.Supp.2d 1396, 1402-03 (S.D.Fla.1997) (holding that imputation defense does not bar bankruptcy trustee from bringing “a claim for damages stemming from a third party’s negligent failure to discover a fraud perpetrated by such corporation’s officers and directors,” when such action benefits corporation’s creditors); Greenberg, supra, 240 B.R. at 489, 517-18 (permitting claims for negligence, fraud, negligent misrepresentation, and aiding and abetting fraud against auditor where proceeds of recovery would benefit creditors). Like Schacht, those courts have reasoned that allowing creditors to recover against a negligent auditor would serve the objectives of tort liability because, unlike Cenco, neither the fraudulent actors nor the corporation’s shareholders would benefit from a recovery.
*377B.
Although we accept Cenco’s premise that tort principles are a useful guide in determining when the imputation defense may be invoked, we decline to follow Cenco’s conclusion that the imputation defense should prohibit all shareholder lawsuits against auditors who were allegedly negligent within the scope of their engagement. We note that Cenco was decided under Illinois law, and so we “write on a clean slate” in addressing the issue under New Jersey law. Schacht, supra, 711 F. 2d at 1347. Further, Cenco was decided over twenty years ago. Events since then suggest that auditors must be more alert to corporate fraud and, where appropriate, courts should take steps to protect and safeguard the public from that fraud.
We first address Cenco’s reasoning that shareholders should not be permitted to recover against allegedly negligent auditors because such a recovery would conflict with the tort principle of only compensating victims. As the circuit recognized in Cenco, if the veil of imputation is completely lifted there will be occasions when offending officers and undeserving board members, as shareholders of the corporation, will be in a position to recover from a negligent auditor. Simply put, under our laws, a shareholder cannot and should not benefit from his or her own wrongdoing. But we should not punish the many for the faults of the few. Allowing the impropriety of some shareholders—who, as directors and officers, perpetrated or did not prevent the fraud— to bar all shareholders from recovery is unfair and improper. Indeed, although shareholders elect the board of directors, that does not necessarily make them culpable in the fraud. In large corporations only shareholders with a substantial ownership of stock may have the ability to affect board elections. Accordingly, we find that the imputation doctrine should not bar suit by all shareholders.
Our conclusion, however, is subject to certain limitations. We agree with the dissent that “no one should profit from a *378fraud he himself perpetrated.” Post at 403, 901 A.2d at 902. Because the imputation defense only protects the innocent and not the guilty, shareholders seeking to recover must themselves be “innocent” of the wrongdoing. As such, imputation may be asserted against those shareholders who engaged in the fraud. If a trier of fact finds that a shareholder participated in the fraud, that shareholder will not receive any recovery. Further, imputation may be asserted against those who, by way of their role in the company, should have been aware of the fraud. For example, those officials, including directors and officers, who own stock and whose position enables them to detect or prevent fraud, cannot escape responsibility if they avert their eyes. Finally, there may be occasions in which shareholders, by virtue of their ownership of a large portion of stock, have the ability to conduct oversight of the firm’s operations. Evidence of such ability, in appropriate cases, may reduce or limit an accountant’s liability for negligence. In so holding, we properly effectuate the tort principle of compensating the victims of wrongdoing by allowing only “innocent” shareholders to recover.3
We also disagree with Cenco that imputation must be applied to shareholder suits to deter future such wrongdoing. In Cenco, supra, the circuit reasoned that “if the owners of the corrupt *379enterprise are allowed to shift the costs of its wrongdoing entirely to the auditor, their incentives to hire honest managers and monitor their behavior will be reduced.” 686 F.2d at 455. However, the nature of today’s corporations makes it increasingly unlikely that shareholders of large corporations have the ability to effectively monitor the actions of corporate officials. See, e.g., A.C. Pritchard, O’Melveny & Myers v. FDIC: Imputation of Fraud and Optimal Monitoring, 4 Sup.Ct. Econ. Rev. 179, 197 (1995) (“[Cenco] suggests a non-imputation rule would undercut shareholder deterrence. But shareholders are not realistically in any position to monitor their managers’ conduct toward third parties____”). As a result, many investors play a passive role in the oversight of a firm’s day-to-day operations, relying instead on third-party professionals to assist in monitoring the corporation’s officers and directors. See generally Sharon Tomkins, Note, Tightening Gatekeeper Liability: Should Officers’ and Directors’ Wrongdoing be Imputed to the Corporation in Suits Against Third-Party Professionals?, 69 S. Cal. L.Rev. 1883 (1996). Indeed, third-party auditors are specifically retained for the task of monitoring corporate activity. Id. at 1909. In contrast, shareholders cannot reasonably be expected to scrutinize corporate books.
Further, our focus cannot be limited only to deterring wrongdoing on the part of corporate shareholders. We also must seek to deter wrongdoing on the part of corporate auditors. See Greenberg, supra, 240 B.R. at 507 (“Unlike traditional imputation cases, in auditor liability cases ... the defendant is not an innocent party.”). If we allow imputation to shield a negligent auditor from the consequences of its actions, we will force shareholders to shoulder the entire loss—a result that violates principles of fairness and equity. Although the auditor in this matter was not accused of committing fraud, the Trust claims that the auditor negligently failed to detect the corporate fraud, thereby violating its contractual obligation to the corporation and allowing the fraud to remain undetected. By way of illustration only, in one allegation the Trust maintains that KPMG failed to comply with GAAS *380by not verifying deposit of a check for $3.5 million that was PCN’s largest single source of income for 1996. In circumstances such as these, where an auditor allegedly failed to comply with applicable professional standards, we fail to see how the auditor can be deemed to be an innocent party deserving of protection. To deter future such wrongdoing, we will not indiscriminately provide a safe haven for allegedly negligent conduct.
We observe, further, that Cenco, supra, interpreted Illinois law, which, at the time of that decision, applied contributory negligence in negligence cases. 686 F.2d at 454. In contrast, New Jersey utilizes a comparative negligence standard. See N.J.S.A 2A:15-5.1. The application of comparative negligence will provide the corporation and its shareholders good reason to actively supervise managers while simultaneously encouraging auditors to carefully monitor the transactions of the corporation and its agents. It also will ensure that an auditor is liable only for as much of a plaintiffs losses as are directly attributable and proportionate to the auditor’s negligence. Auditors cannot and should not be held liable for all corporate accounting fraud. To the contrary, in 1995, the Legislature enacted N.J.S.A 2A:53A-25, which provides greater protections for accountants by limiting their exposure to liability for damages for negligence to third parties. See E. Dickerson & Son, Inc. v. Ernst & Young, LLP, 179 N.J. 500, 502-03, 846 A.2d 1237 (2004). The Legislature, however, intended to protect the profession, not immunize it. An auditor’s professional duty to its corporate client requires the auditor to comply with GAAS and GAAP, which are designed, at least in part, to detect fraudulent activity. Although auditors cannot be expected to catch every instance of corporate fraud, we can require that they answer to claims when they fail to detect fraud that a reasonably prudent auditor acting within the scope of its engagement would uncover. Ultimately, our goal is to establish rules of law that discourage fraud and negligence, not encourage them.4
*381Finally, we must address the oft-drawn distinction in imputation cases involving whether the corporate agent’s fraud was adverse to or for the benefit of the corporation. Originating with Cenco, supra, 686 F.2d at 456, courts have distinguished between “fraud on behalf of the corporation” and “fraud against it,” allowing the imputation defense when a corporate agent’s fraud is “on behalf of’ or for the benefit of the corporation. In such eases, however, there can be difficulty in differentiating between whether the malfeasant conduct benefits or harms the corporation. See Debra A. Winiarsky, Litigating an Accountant’s Liability Suit-Contributory Negligence and Third Party Practice, SC46 A.L.I.-A.B.A 315, 326 (1998) (“[A]lmost any situation involving management fraud can be seen as either aimed at harming or benefiting the company.”). As does Schacht, supra, 711 F.2d at 1348, we find that inflating a corporation’s revenues and enabling a corporation to continue in business “past the point of insolvency” cannot be considered a benefit to the corporation. See also In re Investors Funding Corp., 523 F.Supp. 533, 541 (S.D.N.Y.1980) (“A corporation is not a biological entity for which it can be presumed that any act which extends its existence is beneficial to it.”). In this matter, there are allegations that support a finding that the fraudulent acts of Mortell and Wrabaek, high-ranking managers of PCN, did not benefit the corporation, but rather, led to the corporation’s ultimate demise. According to the Trust’s complaint, after the discovery of PCN’s improper accounting practices, “PCN continually operated at a cash flow deficit and was in default on its bank debt,” forcing the corporation to file for bankruptcy.
Even if the fraud of Mortell and Wrabaek could be considered a “benefit” to the corporation, the limited record before the Court precludes us from definitively making such a determina*382tion. Moreover, any benefit would not be a complete bar to liability but only a factor in apportioning damages. See Allard v. Arthur Andersen & Co., 924 F.Supp. 488, 495 (S.D.N.Y.1996) (finding that “notwithstanding the adverse interest exception” “imputation would not necessarily operate as a complete bar to [trustee’s] negligence and malpractice claims” in jurisdictions that apply comparative negligence); Cenco, supra, 686 F.2d at 456 (stating that “stockholders should not be allowed to escape all responsibility for such a fraud”) (emphasis added).
Accordingly, we conclude that tort principles do not require that the imputation defense bars shareholder suits against allegedly negligent auditors. To the contrary, those principles, applied in light of the nature of today’s corporations, require that such suits be permitted and that negligent auditors be held responsible for their wrongdoing.
C.
In so holding, we note that KPMG’s liability must be defined by the scope of the engagement it entered into with PCN. As such, we disagree with the dissent that by allowing a claim for negligence, the Court “ignores the basis of the bargain between PCN and KPMG and, instead, imposes its own view of the services an auditor is retained to perform.” Post at 403-04, 901 A.2d at 902. The first element of negligence is duty. Ultimately, the duty owed to another is defined by the relationship between the parties. Here, the relationship between KPMG and PCN is the contractual obligation for KPMG to conduct auditing services for PCN. For example, KPMG attached the following opinion to PCN’s 1995 Form 10-K, which was directed to PCN’s Board and stockholders:
We have audited the consolidated financial statements of Physician Computer Network, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statement of operations, changes in shareholders’ equity (deficiency), and cash flows for each of the years in the three-year period ending December 31, 1995. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express *383an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Physician Computer Network, Inc. and subsidiaries____
Any suit brought in negligence against KPMG must be based on the scope of that, or related, understandings and agreements to determine whether KPMG violated any duty. That review includes, but is not limited to, the engagement letter and GAAS. Cf. N.J.A.C. 13:29-3.5 (stating that auditor “shall not permit [his/her] name to be associated with financial statements ... unless [he/she] has complied with [GAAS or Statements on Auditing Standards issued by the American Institute of Certified Public Accountants]”). Here, the complaint alleges that
[c]ontrary to the representations in its audit opinions, KPMG’s audits of PCN’s 1995 and 1996 financial statements were not conducted in accordance with GAAS. KPMG certified PCN’s 1995 financial statements, even though PCN’s 1995 books and records were in such disarray that, when the irregularities in PCN’s financial statements came to light, another ... auditing firm ... was unable to recreate accurate financial statements for that period.
Ultimately, the issues to be resolved are whether KPMG was negligent in performing its agreed duties and to what extent such negligence proximately contributed to the damages suffered by plaintiff. In so providing, we do not re-write the agreement; we effectuate it.
Nor do we see how the dissent’s application of the imputation doctrine to this context would further its goal of holding KPMG liable based on the scope of its engagement. According to the dissent, KPMG only can be held liable if it “actively participated in the fraud.” Post at 397, 901 A.2d at 898. Under such a scheme, KPMG would be excused if it negligently failed to effectuate the *384scope of its engagement by not following GAAS or GAAP when it certified PCN’s annual financial statements. Further, KPMG would receive a free-pass even if it could be shown that the company violated the terms of its engagement by recklessly disregarding a substantial risk that the statements that it was certifying were indeed fraudulent. As becomes clear, the dissent’s analysis has nothing to do with effectuating the contractual agreement between KPMG and PCN. Rather, it simply would apply the imputation doctrine in the corporate auditing context and require evidence of active participation by auditors in the fraud before shareholders can bring suit—a notion that we find unsupported by our case law, agency principles, and tort jurisprudence.
Finally, the dissent asks us to adopt “the thoughtful, reasoned and comprehensive opinion” by Judge Debevoise in a federal case against KPMG. Post at 404, 901 A.2d at 902. We do not doubt the persuasiveness of that opinion. However, the allegations in that matter were based on violations of Section 10(b) of the Securities and Exchange Act of 1934 and Section 11 of the Securities Act of 1933. This appeal, although grounded in similar facts, involves entirely different claims based on state law. Because this Court is the final arbiter of such claims, reference to that decision does not answer the question before this Court.
VII.
We thus conclude that when an auditor is negligent within the scope of its engagement, the imputation doctrine does not prevent corporate shareholders from seeking to recover. A limited imputation defense will properly compensate the victims of corporate fraud without indemnifying wrongdoers for their fraudulent activities. To the extent that shareholders are innocent of corporate wrongdoing, our holding provides just compensation to those plaintiffs.
With that conclusion in mind, we return to the procedural posture of this matter. We agree with the Trust that the pleadings do not support the availability of the imputation defense in *385this appeal. See, e.g., In re Sec. Investor Prot. Corp., supra, 274 B.R. at 782 (concluding that “Cenco type issues cannot be resolved on a motion for dismissal”). Even at this early stage, the complaint, fairly read, presents a colorable claim that KPMG, by negligently failing to discover inaccuracies in PCN’s financial records, contributed to the misconduct that led to PCN’s bankruptcy. If developed in discovery, the facts may establish those allegations. Conversely, at that time, KPMG may move for summary judgment if the evidence demonstrates that no “rational factfinder” could conclude that the audits were negligently conducted. Brill v. Guardian Life Ins. Co. of Am,., 142 N.J. 520, 540, 666 A.2d 146 (1995). Until discovery occurs, however, KPMG does not deserve the same protection as an innocent, uninvolved third party. We therefore affirm the Appellate Division decision, as modified, and remand this matter to the trial court for discovery to allow the Trust an opportunity to present evidence to support its claims that KPMG was negligent and that such negligence proximately caused damage to the corporation. Our opinion does not express, and is not intended to express, any opinion concerning the liability of defendant in this matter.
This allegation and all other statements below are derived from the Trust's complaint and have not been substantiated at this early stage in the proceedings.
The presence of auditor negligence arguably could be called an “exception" to the imputation doctrine. However, Integrity, supra, refers to estoppel, that is, the accountant’s culpability "would estop it from raising the defense of imputation.” 240 N.J.Super. at 506, 573 A.2d 928. As a practical matter, we may consider negligence to be both an exception to the imputation doctrine and a ground for estoppel. In any event, the effect is the same.
The task of separating those shareholders who should be barred by the imputation defense from those that should not is generally a question of fact that can be addressed at the trial level and, more particularly, is a function of the discovery process and motion practice. For example, KPMG is entitled to a list of shareholders represented by the Trust and, based on that list, can assert the imputation defense against appropriate shareholders. If it is revealed that the Trust represents Mortell and Wraback, then KPMG would be entitled to raise the imputation defense to preclude any recovery by those individuals. Similarly, the auditors may claim that shareholders who own large blocks of stock knew or should have known of the misconduct, in which case evidence can be presented concerning those shareholders’ knowledge.
Trial courts thus will be able to address these matters on a case-by-case basis until experience presents an opportunity for further guidance. Finally, this process also may have the salutary effect of encouraging plaintiff groups to ensure that they represent only the appropriate shareholders, thereby saving time and resources.
The principles set forth in this Court's decision in Frugis v. Bracigliano, 177 N.J. 250, 827 A.2d 1040 (2003), should guide the apportionment of fault in this *381circumstance. As Justice Albin explained in Frugis, "the jury [should] first determine who, if anyone, is at fault among the parties, and then ... determine the total damages award. Last, the jury should be charged on apportionment of damages and determine the allocation of fault.” Id. at 283, 827 A.2d 1040.