Accountant Liability
Accountants, like many professionals who provide services to the public,
such as lawyers and doctors, may be liable to others for harm caused by
their mistakes. Accountants can be sued for malpractice on grounds of
negligence, fraud, or breach of contract. This module looks at the duty an
accountant has to his or her clients and third parties.
An accountant can be held responsible for losses or harm resulting from his
or her failure to perform as a competent, reasonable professional.
Specifically, an accountant is required to perform according to generally
accepted accounting principles (GAAP) and generally accepted auditing
standards (GAAS).
In essence, a legal contract is created whenever an accountant is hired and
the accountant is said to implicitly agree to complete work in a competent
and professional manner, according to professional standards (GAAP and
GAAS).
Clients harmed by the negligence or deliberate wrongdoing of an account
may file a malpractice action alleging negligence, breach of contract, and/or
fraud.
Creditor Remedies
Unfortunately there are times when a business is unable to meet its
financial obligations—to pay its bills, loans, vendors, employees, and so on.
In such instances, creditors may seek to recover from the debtor by
imposing a lien on the debtor’s property.
There are three types of liens: consensual liens, statutory lies, and judicial
liens. Most types of property are subject to a lien, depending on the nature
of the debt and the type of property. However, once a bankruptcy petition
is filed, such liens may or may not be enforceable. Additionally, when a
court grants an automatic “stay,” this will stop any further creditor claims
