Accountants and accounting firms are held to strict professional standards. When they provide client services such as tax preparation, auditing, business consulting, and asset management, accountants must follow these standards at all times. In cases where an accountant fails to abide by rules of the profession, and their clients consequently suffers financial loses, accountants may be subject to a malpractice lawsuit for their errors and negligence.
The Business Trial Group handles accounting malpractice lawsuits on a contingency-fee basis and we have recovered tens of millions of dollars for clients harmed by accountant errors. We charge no hourly fees, and if we accept your case and do not win, you pay us nothing. To schedule a consultation to discuss your accountant’s conduct, contact our attorneys.
Accounting Industry Professional Standards
Industry standards for accounting methods and practices are set forth in a set of rules known as “Generally Accepted Accounting Principles,” or GAAP, which is issued by the Financial Accounting Standards Board (FASB). Individual states also have professional accountancy standards that are based in part on GAAP.
GAAP incorporates ten key concepts that include the Principle of Regularity, the Principle of Consistency, and the Principle of Sincerity. However, many of these standards are very general. And because GAAP guidelines are specific to financial reporting standardization, they do not necessarily apply to all accounting matters. Finally, only public companies are required to use GAAP. Private companies often choose to use them, but are not required to.
The American Institute of Certified Public Accountants (AICPA) has its own code of professional conduct that outlines principles of responsibilities, integrity, objectivity and independence, and due care for members. AICPA additionally provides accounting standards specific to audits (both for businesses and individuals), tax preparation, consulting services, valuation services, and continuing education. AICPA’s Auditing Standards Board sets forth “Generally Accepted Auditing Standards” (GAAS).
Regardless of which set(s) of professional accounting standards are applied, accountants owe a duty of care to their clients. This means they must generally:
- Avoid conflicts of interest
- Not misrepresent or omit material facts
- Perform services with competence, and avoid performing services that cannot be completed competently
- Perform due diligence on the client and the client’s finances in order to have a reasonable basis for drawing conclusions or making recommendations
- Obey applicable state and federal rules and regulation
- Meet licensing and continuing professional education (CPE) requirements
- Maintain accountant-client confidentiality
Due to professional accountant standards being broad and often overlapping, it is imperative to discuss possible misconduct with an experienced accounting malpractice attorney.
Types of Accounting Malpractice
Accountants do much more than prepare taxes. They also help clients perform audits and reviews; provide consulting services; analyze financial records; plan and meet financial goals; help with a company’s budgeting; reporting, and efficiency; and maintain investments for brokerage and asset management firms.
For example, if an accountant mishandles a tax return or provides faulty tax advice, the client can lose money and run afoul of the IRS. Likewise, if you rely on financial documents that were negligently prepared by an accountant, your business or personal finances can suffer as a result. In fact, an accountant could be liable for your losses even if you did not hire them directly.
Specific examples of accounting malpractice include:
- Giving incorrect tax advice or making tax return errors
- Manipulating financial statements or providing incorrect reports to stockholders or partners
- Wrongful certification or failure to properly audit financial statements
- Improper maintenance of records and financial ledgers
- Failure to detect fraud and embezzlement
- Accountant overbilling
- Conflicts of interest
- Aiding tax evasion, fraud, or embezzlement
- Committing inventory, accounts payable, or accounts receivable errors
- Making incorrect business evaluations
- Giving faulty estate planning or investment advice
- Embezzlement, violating state and federal law, license fraud, and other reckless actions
Anyone who may be the victim of accounting malpractice should save all documents and statements that relate to their losses and contact an attorney as soon as possible to discuss their legal options.
Proving an Accounting Malpractice Claim
Accounting mistakes do not necessarily mean that malpractice has occurred. To win an accounting malpractice claim, the client must satisfy the following legal elements:
- The accountant owes the client a duty of professional care.
- The accountant breaches the duty of care owed to the client. A breach might occur from the accountant failing to follow GAAP, GAAS, AICPA, or other standards (i.e., negligence), failing to follow specific provisions in the accountant-client contract (breach of contract), or an intentional wrongful act, such as misappropriating assets or manipulating financial statements (i.e., fraud).
- The client suffers monetary losses.
- There is a provable, causal link between the alleged breach of duty and the client’s losses.
State laws on public accountancy can affect a malpractice claim. Claims must typically be brought within two to four years from the time the person filing a malpractice action knew (or reasonably should have known) of the accountant’s negligent conduct. The Business Trial Group has offices in 15 states, including more than 25 Florida offices, and handles accounting malpractice cases nationwide.
Contingency-Fee Accountant Malpractice Lawyers
No matter how complex an accountant’s errors, omissions, or misconduct, our accountant malpractice attorneys work on a contingency-fee basis. Do not risk compounding your losses by hiring a lawyer for hundreds of dollars per hour, with no guarantee of success.
Hire attorneys that believe in your cases and will share the risk of the litigation. With the Business Trial Group you only pay for results—not hours.