According to a report, compared to 2020, the number of accounting malpractice claims also increased by about 50% in 2021. Accountants are responsible for doing more than simply preparing taxes. They analyze financial records, provide consulting services, and help the client with the audit and review, budgeting report, planning and meeting financial goals, asset management, and maintenance of investment for brokerage. In order to maintain high-quality services, accountants are bound to follow the Generally Accepted Accounting Principles (GAAP) and Generally Accepted Auditing Standards (GAAS) guidelines.
So, if the fiscal year financial report doesn’t make sense and you suspect it to be the accountant’s fault, hire an expert accounting malpractice lawyer to investigate and help protect your rights. An accounting malpractice lawyer will study your case to identify either of the following violations:
Negligence and breach of contract
Negligence and breach of contract can be intentional or unintentional. If your accountant intentionally ignores the practices stated by the GAAP and GAAS, it will constitute a breach of contract. An accounting malpractice lawyer will take a closer look at the contract of the accountant at fault to understand the terms of your agreement and determine if it was malpractice or not.
Typically, a breach of contract occurs when the accountant fails to provide high-quality services or meet the standard of professional care and also fails to use their learning, skill, and expertise to solve the financial issue correctly, resulting in financial loss for your company. This is where an accounting malpractice lawyer will establish a connection between the damages and the breach to clarify your claim and convince the judge in your favour.
Misrepresentation can be defined as the act of the accountant to hide their wrongdoing. This can be due to negligence or intentional misrepresentation, which can account for deceit or fraud. For instance, the account will provide you with an incorrect report to conceal embezzlement. Hiring an accounting malpractice lawyer will help you prove the following:
- The representation was fake.
- The accountant has intentionally misrepresented a situation to earn profit or hide their wrongdoing.
- The plaintiff has suffered a great loss because of the misrepresentation.
- Misrepresentation is the main cause of the damage.
Other forms of accountant malpractice include failure to audit financial statements, provide correct tax advice, comply with the GAAS and GAAP standards, and give wrongful advice in financial matters.
Proving the accounting malpractice claim
One of the biggest misconceptions about accounting malpractices is that they are mistakes in financial statements or records. However, this isn’t the case. The roots of malpractice go deeper than your reach. An accounting malpractice attorney will use the following legal elements to help you in winning the case:
- Your accountant is responsible for providing you with the best professional care.
- Your accountant breached the contract by failing to follow the AICPA, GAAS, or GAAP rules and regulations.
- Your accountant intentionally committed fraud, such as manipulating financial statements or misrepresenting assets.
- There is a link between your loss and the accountant’s malpractice.
Summing it up!
Accounting malpractice cases can be very complex. The most challenging part is convincing the judge that the loss suffered by the plaintiff (company) resulted from negligence or misrepresentation by the accountant (defendant). An experienced accounting malpractice lawyer will use the GAAP and GAAS guidelines and witness testimonies to prove how the accountant failed to provide the required standard of services, which caused the company to suffer a great loss.
However, you must remember that in the case of accounting malpractice, the litigation is controlled by strict regulations regarding the time period between the incident and filing the claim. Therefore, it is advised to contact an accounting malpractice lawyer when you suspect a breach of contract, misrepresentation, or negligence from the accountant.