What Is Accounting Malpractice?
Managing accounting is a major source of stress for many businesses, which is why they turn to a professional to take over financial affairs. But what if the accountant fails to properly manage the accounts?
Accountants are generally required to follow:
- Generally Accepted Auditing Standards (GAAS) – Standards that pertain when an accountant is asked to prepare transparent and impartial auditing of a business’s accounts.
- Generally Accepted Accounting Principles (GAAP) – Principles that apply when an accountant is formulating financial statements for a business.
When accountants deviate from these standards, accountant malpractice can occur.
Types of Accounting Malpractice
Some types of accountant malpractice include:
Breach of Contract
This form of malpractice is usually the result of an intentional act on the part of the accountant that constitutes a breach of contract. When an accountant agrees to provide professional services but fails to produce a specified result or adhere to an appropriate standard of professional care, and this failure causes the business to suffer harm, a breach of contract has occurred.
Like any other tort claim, when alleging negligence against an accountant, four basic elements must be proven:
- The accountant had a duty of reasonable care to provide accounting services.
- The accountant failed to use the skill, learning, and care normally used by accountants in similar situations, resulting in a breach of duty.
- Due to this breach of duty, the plaintiff suffered harm.
- A causal relationship exists between the accountant’s breach and a plaintiff’s damages.
Sometimes an accountant will make a misrepresentation in order to hide wrongdoing. This misrepresentation may in itself be considered negligence, fraud, or deceit; such as, if an accountant makes a misrepresentation in order to conceal embezzlement or some other wrongful act. Intentional misrepresentations or claims of gross negligence can result in higher damages awarded to a plaintiff.
If you suspect that your accountant committed malpractice by deviating from GAAS or GAAP standards, contact Murray & Murray online or call (419) 664-3711 today.