Accountant Liability

In: Business and Management

Submitted By kaj0264
Words 2779
Pages 12
Contrary to some belief, accounting is not a “walk-in-the-park” career. Accountants do not sit at a desk one-hundred percent of the time crunching numbers that always add up perfectly. In fact, accounting fraud is one of the largest scandals found today. When an accountant enters an engagement with a client, who are they liable to? Certainly not just to the client, but also anyone who could negatively be affected by a material misstatement, as well as the government. These responsibilities are not easily assumed, nor are they equally distributed.
Accountants assume a large responsibility to their clients. They enter a contractual agreement through an engagement letter, and use engagement letters to minimize the risk they assume under the contract. Many engagement letters include memos limiting the recovery. (Reinstein, Lobingier, & Green, 2009) Accountants expressly agree to do a project by a specific date, and imply that the work will be completed carefully. If an accountant breaches the contract, they can be found liable for damages. If it can be found that an accountant did not act with skill and competence, causing harm to their client, negligence can be proved. Accountants also may be found guilty of fraud. Fraud can be proved if an accountant makes a false statement, knowing it is false, and the client relies on the information, resulting in damages. Another liability to the client is the trust clients give their accountants. They are liable to keep the information confidential and to use it only for the client’s benefit. (Beatty, Samuelson, & Bredeson, 2013, pp. 432-434) As defined in Sec. ET-501 of the AICPA Professional Standards, accountants in public practice will not disclose any confidential client information without the specific consent of the client. (Cashell & Fuerman, 1995) It is the accountant’s responsibility to be diligent…...

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