Malpractice is a word that conjures up images of doctors leaving instruments in surgical patients or failing to diagnose an illness. But the truth is that malpractice is a legal term that can apply to any professional that fails to provide services in line with their industry’s standards, whether the field is medicine, the law, or even accounting. The idea of accounting malpractice may seem strange – after all, it’s not like an accountant’s mistake can lead to worsening disease, or physical pain, or death! But the truth is that when an accountant does not adhere to the generally accepted practices of their profession, the result can be devastating for their client. Let’s take a closer look at what accounting malpractice is, and how it can be proven in court.
When you choose an accountant to take care of your taxes, your bookkeeping, your financial statements or other fiscal documents, you trust that they will follow the GAAP – Generally Accepted Accounting Principles — that provide the standard for the accounting profession. These are hard and fast rules that have been set forth by the American Institute of Certified Public Accountants, and it is expected that tax preparers, accounting consultants, certified public accountants and asset managers will all be familiar with them and follow them to the letter. GAAP represents more than just guidelines: violations are what is used to prove accounting malpractice. The GAAP rules tell accounting professionals that:
- They cannot knowingly misrepresent facts or details
- They cannot be involved in any type of conflict of interest
- They are only permitted to provide services they are capable of completing competently and with professional care
- They must meet all licensing requirements
- They must keep all communications with their clients confidential
Beyond proving that an accounting professional has violated a GAAP rule or rules, a client interested in pursuing an accounting malpractice case must be able to prove that the violation of GAAP rules committed by the accounting professional resulted in specific monetary losses. There are many actions or inactions that can result in these types of losses, including improperly preparing financial reports or business statements; failing to recommend an audit; making a costly mistake on the client’s tax returns; maintaining sloppy financial records; making mistakes on inventory; or giving bad or illegal tax advice. While most of these represent carelessness or negligence, fraud represents an even more serious form of accounting malpractice for which there can be criminal consequences.
If you have suffered losses as a result of your accountant’s misrepresentation or carelessness, you may be eligible to file an accounting malpractice case against them. To determine what your options are, contact our experienced accounting malpractice attorneys today to set up a time to meet.