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How does an accountant commit malpractice?

In Florida, accountants can cause significant harm to businesses and individuals due to malpractice. Understanding what qualifies as malpractice is essential for those who rely on professional accountants’ expertise and work product. Consider the following points if you suspect an accountant of malpractice.

Defining accounting malpractice

Professional malpractice occurs when an accountant works outside of specifically defined accounting standards. The individual might act intentionally or negligently, and in either scenario, can cost a business significantly in terms of fines, additional expenses or financial losses. For example, malpractice occurs when accountants misinterpret financial transactions and events and record them in a company’s financial statements.

Common areas of malpractice

Accountants handle various transaction types, from recording basic financial transactions and auditing to interpreting complex accounting rules and standards. They may also provide tax guidance and manage a company’s investing and treasury functions.

Malpractice commonly takes place due to the following reasons:

  • Failing to adhere to GAAP (Generally Accepted Accounting Principles) or GAAS (Generally Accepted Auditing Standards) when recording or interpreting accounting transactions.
  • Providing inaccurate tax advice.
  • Providing inaccurate accounting advice.
  • Failing to audit financial statements or detect misappropriations accurately.
  • Engaging in fraud in investments, cash flow or CPA licensure.

Types of claims

Malpractice claims can involve a breach of contract, such as when an accountant does not deliver on contracted services or doesn’t meet the required standard of professional care, which causes harm to the client. A negligence claim is based on an accountant failing to provide the level of care expected of other accountants in similar business scenarios, which harms the client.

A claim for misrepresentation involves an accountant making false representations to cover up their errors. The misrepresentation could fall under negligence or be intentional, which could qualify as deceit or fraud. A misrepresentation claim must involve a client suffering harm or damages directly due to an accountant’s false representation.

Proving malpractice

To successfully prove an accountant engaged in malpractice, the following elements must be present:

  • The accountant owed a duty of care to the client.
  • The accountant breached their duty.
  • The client suffered harm/damages.
  • The damages were a direct result of the accountant’s breach.

Accounting malpractice cases involve a degree of complexity and require timeliness if making a claim. Acting promptly can resolve the situation and provide peace of mind for you and your business.