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Accounting malpractice: What every business owner should know

When people think of "malpractice," they usually think of doctors or lawyers -- but accounting malpractice can be just as problematic. For a small business, it can be utterly devastating.

As a small business owner, you probably rely on your accountant to operate with a certain level of accuracy and care. If your accountant fails to do so or breaches his or her fiduciary duty toward your company outright, you have every reason to seek compensation for your personal and business losses.

What are the standards an accountant is expected to follow?

If your accountant is providing an unbiased audit of the business accounts (in preparation for a sale or a loan application, perhaps), then he or she is expected to follow the Generally Accepted Auditing Standards (GAAS). If your accountant is the person who prepares your company's financial statements, then he or she is expected to adhere to the Generally Accepted Accounting Principles (GAAP).

These offer similar standards that control the professional conduct and responsibilities of the accountant -- and give plaintiffs who believe they've been wronged a starting point to assess their situation.

When do you have the right to file a claim for professional malpractice?

When you believe that your accountant failed to exercise the normal care, skill or learning that was both expected and required under the circumstances of your agreement and that failure caused you some form of economic damage, professional negligence has occurred. In many cases, professional negligence may be mixed with outright fraud -- especially if the accountant misrepresented his or her skill or tried to conceal wrongdoing (like embezzlement).

If your company is suffering due to an accountant's error, and you believe that negligence or fraud was involved, find out more about your legal options today.

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