What Is Accountant Malpractice? What Can You Do If You Fall Victim To It?
We’ve all heard the phrase malpractice applied to the practice of medicine. It’s where a doctor or other healthcare provider or facility does not exercise the proper care, or is negligent in a way that ends up causing harm. You can be a victim of malpractice when dealing with nearly any profession where there is an expectation of professional know-how and practice, and this includes accountant malpractice. Accountants are hired and relied upon for their expertise, and when an accountant deviates from generally accepted accounting principles and standards and harm or financial loss occurs as a result, they can be held legally responsible for their failures.
The American Institute of Certified Public Accountants describes accounting as “the art of recording, classifying and summarizing, in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof. When these duties are not carried out, whether purposely or through negligence, accounting malpractice has taken place. There are many examples of accounting malpractice, but most include an accountant providing a client with incorrect advice or acting in a way that results in the client having to pay additional expenses or fines.
The most common areas of accounting malpractice are:
- Failure to properly audit financial statements or detect misappropriations
- Failure to provide correct tax advice
- Providing wrong advice regarding accounting matters
- Fraud, including in the areas of tax investment, securities, and CPA licensure
- Failure to comply with GAAP and GAAS standards
Tax preparation is an area where a great deal of accounting malpractice is seen, and the same is true of failure on the part of the accountant to detect fraud or internal control weaknesses during an audit. A successful accounting malpractice lawsuit proves that four elements have taken place. These are:
- The accountant had a duty to the plaintiff
- The accountant breached their duty to the plaintiff
- The plaintiff suffered damages
- The damages suffered by the plaintiff were caused by the accountant’s breach
The most challenging part of any malpractice case lies in proving that the harm that has been suffered by the plaintiff was the result of the breach of responsibility by the defendant, and this is true in accounting malpractice cases as well. An experienced accounting malpractice attorney will utilize testimony by expert witnesses who will explain how the accountant failed to offer the standard level of care, as well as how it was foreseeable that as a result of that failure the plaintiff would suffer harm.
It is important to remember that the litigation of accounting malpractice is controlled by strict rules regarding the amount of time that has passed between the discovery of the injury and filing a claim. If you suspect that you have been a victim of accounting malpractice, it is advised that you contact an experienced accounting malpractice attorney from the law firm of Bochetto & Lentz at the earliest possible time.
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