Accountant Liability: The Legal Definition

Posted on: August 22, 2019 by Huntersure LLC.

Accountants have a lot on their plate during tax season, but in reality, their work never really ends. And when it comes to dealing with a company’s taxes or someone’s personal financial information, there is plenty of room for mistakes to be made.

An accountant’s liability describes the legal liability assumed while an accountant performs their professional duties. They become liable for a client’s accounting misstatements and mistakes, putting the accountant in a bad spot legally and professionally. This risk can bring claims of negligence and fraud forward. An accountant who is negligible in their examination of a company can end up facing legal charges from either the company or investors and creditors that depend on the accountant for sharp work.

A Better Look at Accountant Liability

Accountant’s liability makes an accountant’s job, which is already difficult and stressful, even more pressured. An accountant’s participation in a fraudulent case may be hard to prove because it could be their client committing the fraud, which could have gone over the accountant’s head.

However, this makes the accountant legally liable for being negligent of fraud, even if they had no actual stake in the fraud being committed. What happens next is that an accountant and their team will be dragged into a long and drawn-out investigation and audit process that can hurt not only their own pocketbook but their reputation in the accountant community.

Negligence Among Accountants

Accountants carry as much weight as doctors, lawyers, and engineers when it comes to the standard of care. Providing a skilled service that results in compensation requires reasonable care and responsibility.

For negligence claims, an auditor owes a duty only to their client. An auditor’s liability for negligence in the conduct during an audit of financial statements is usually confined to the client. Many accountants think that they can not be held liable under Federal securities laws on account of their practice not being involved in securities.

Carrying Accountant Professional Liability Insurance

One way an accountant or firm can be protected against any claims made related to fraud or negligence is accountants professional liability insurance. Paying for legal defense will be a heavy cost, so having accountants professional liability insurance will supply the financial aspect needed at least. While lawsuits and investigations can drag on, accountants professional liability insurance will help to take care of the financial fallout from a claim.

About Huntersure

At Huntersure, we specialize in providing quality professional liability solutions to accounting professionals. Our Accountant Liability Insurance program provides coverage for accountants, auditors, bookkeepers, and tax preparers, so no matter where your clients lie in the industry they can have the coverage they need to protect themselves and their assets. To learn more about our operation and our Professional Liability Insurance solutions, contact us today at (855) 585-6255.

Posted in: Accounting blog