What Happens When Your Accountant Fails to Manage Your Accounts Properly

Accountants are held to the same standards as other professional service providers. Clients go to accountants with the expectation that they will act in their best interests, following the best accounting practices and accounting standards.

If an accountant deviates from this, a breach of contract may occur.

It's up to the client or audit to catch these misconducts, but they do hold serious consequences for the attorney.

Breach of Contract When Deviating from the GAAP and GAAS Standards

Accountants must abide to the Generally Accepted Accounting Principles (GAAP) or Generally Accepted Auditing Standards (GAAS). Every accountant must follow these guidelines. The right guideline depends on the accountant’s services offered, and they have even been put into use by the SEC because they offer proper transparency, unbiased auditing and financial reporting.

Clients sign a contract with their accountant, and the contract will outline what happens if malpractice occurs.

When is a breach of contract triggered?

If an accountant failed to meet acceptable standards of professional care or produce a specified result, then it’s possible that a breach of contract occurred. The failure would have to cause harm to the client in some form.

Accounting Negligence

Negligence must be proven for a malpractice claim against the accountant is to be proven. If an accountant acted in the same way another accountant with the same experience and education acted, negligence may not be proven.

All accountants have a duty to provide reasonable care when providing service.

Negligence occurs when accountants don’t use their:

• -Care
• -Education
• -Skill

If the accountant uses all of these points, it will be difficult for an attorney to be able to prove that negligence occurred. A malpractice attorney will have to show that the accountant caused damage to the plaintiff.

But the damage must also be linked to the breach of contract.

There’s also the chance that the accountant tried to cover up his or her wrongdoings. When this happens, the accountant may make misrepresentations to try and cover their wrongdoings. This act may also be considered negligent and a misrepresentation.

If misrepresentation occurred, this may lead to an embezzlement charge and is also considered fraud.

Gross negligence and misrepresentation may lead to higher awards and damages, but there must be proof that:

• -The plaintiff relied on the advice and professionalism of the accountant
• -The failure led to the plaintiff suffering damage
• -False representation occurred
• -Representation was before or during material fact

When negligence occurs to a business, this is an entirely different matter. Your business will need to check the documents and financials for accuracy, and the company will be responsible for fees, taxes and any interest that’s due as a result of an accounting mistake.

An accountant may be held liable, and this would result in a direct lawsuit against the accountant and the firm that they work for, if a firm exists. Businesses will still be required to satisfy all of their financial responsibilities, including paying their taxes, even if an error occurred. Accountants may also have insurance, and this may cover the costs of the damages sustained by the business.