Accounting Malpractice

Accounting malpractice frequently entails careless behavior, which does not absolve the perpetrator of responsibility for any losses incurred. The following are the legal aspects of an accountant malpractice lawsuit:

Professional accountant owes a customer an affirmative duty of care and responsibility; professional accountant participates in negligent behavior, which may constitute a contract breach for accounting violations.

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

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