The Liability Of An Accountant - 1235 Words

THE LIABILITY OF AN ACCOUNTANT Recently, the question of liability has become more prevalent in the practice of public accounting. The AICPA (American Institute of CPAs) has been lobbying for liability reform in cases involving negligence or fraud committed by public accountants. So, being an accounting major myself, I wanted to write about the ongoing fight involving liability reform in public accounting. Contrary to some belief, accounting is not a â€Å"cakewalk† 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†¦show more content†¦If the accountant makes a false statement of fact, either knows the truth or recklessly disregards it, or if the client justifiably relies on the statement, the accountant would be liable for fraud. Accountants assume a large responsibility to their clients. They enter a contractual agreement, known as an engagement letter, and use engagement letters to minimize the risk they assume under the contract. Many engagement letters include memos limiting the recovery. Accountants expressly agree to do a project by a specific date, and imply that the work will be completed carefully. Like I said before, if an accountant breaches the contract, they can be found liable for damages. Another liability that I didn’t really mention was the trust that the clients give to their accountants. They are liable to keep the information confidential and to use it only for the client’s benefit. It is the accountant’s responsibility to be diligent with not only confidential client information, but also providing services with care, thoroughly, and to follow the ethical and technical standards provided to them by the GAAP (Generally Accepted Accounting Principles) and the AICPA. I n a case of Mattco Forge v. Arthur Young, there was a serious question of an accountant’s liability to client. In the 1980s, Mattco Forge began a lawsuit against General Electric, claiming discrimination against the company while they awarded GE contracts.Show MoreRelatedCurrent And Long Term Liabilities1504 Words   |  7 Pagesis to make profits, but understanding how to manage both current and long-term liabilities will insure an organizations success. A liability is a debt incurred by a business that must be repaid. There are current liabilities, which need to be repaid within one year and there are long-term liabilities that are repaid over a period of time longer than a year. 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