Here's something to consider: The FAA doesn't require CFIs to hold a medical certificate when they're flying with a fully qualified pilot. The CFI certificate is a license to teach, not to fly.
Now, I know the line gets blurred when there is a 5000 hour CFI teaching a 50 hour private pilot. After an accident, the FAA very well might look at the bigger picture of what was going on and, if the accident was caused by some kind of gross negligence, ask the CFI why they let it happen. Common sense has to come in to play at some point.
But let's take some of the flying I've done. Way back in the day, I had a client who was a 150 hour private private pilot with a Cirrus SR22. He'd bought the plane new and had been checked out by Cirrus factory instructors over the course of several days. I'd never touched an SR22 before when he asked me to train him for his instrument rating.
I was a fairly experienced CFII, and had flown other high performance singles before, but never the SR22. Let's say something had happened during my first few flights with this client. Would the FAA have expected me to know every system, operating limitation, and characteristic of the SR22? The client was the one in charge of operating the aircraft. I was there to teach him how to do it on instruments.
Another example from my more recent past: I'm the only active instructor who holds an MEI rating at my home airport. A very experienced, very professional, current, ATP-rated pilot who owns and flies a Cessna 340 under Part 91 asked me to give him an instrument proficiency check. We talked about the simulated zero thrust power settings for doing single engine approaches, made it clear he was the PIC at all times, and off we went. It was my first and only hour in a Cessna 340. If he'd screwed something up on the preflight, would I have been held responsible?
I don't know. Maybe so. I was willing to take my chances.
And to reiterate, I'm all for safe operating practices. I double check and verify pilots from time to time, too. I just think it's important to be clear about the difference between "This is good advice to have a long, happy, and safe career as an instructor," versus "It is your legal obligation to oversee everything regarding the flight because you will be held accountable by the FAA."
I bet
MidlifeFlyer could provide some good insight on this topic.