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Liability of Certified Public Accounts
An accountant is someone who prepares and analyzes financial records for a company, a government, or an individual. Decision makers to interpret financial information to plan then use these financial records. A certified public account (C.P.A.) is an accountant who takes and passes a uniform state test and then obtains a special license to practice.
Accountants are professionals whose expertise and knowledge the clients that hire them count on. Because of this expertise, the reports and financial statements that an accountant produces for his clients are considered a fair and accurate reporting of their clients' financial situation.
Clients and third parties use these reports and financial statements to make important decisions. Because of how these reports and financial statements are used, an accountant has a liability to his clients and sometimes to third parties. There is potential liability under:
(1) Common law
(2) Securities Laws
(3) Internal Revenue Code
An Accountant's Liability to his Clients under Common Law
An accountant's common law liability to his client can include:
(1) Breach of contract
(2) Negligence
(3) Fraud
Breach of contract is the failure, without legal excuse, of an account to perform the obligation of the contract between the client and the accountant. The accountant owes a duty to his client to honor the terms of the contract that they entered into.
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