Accountants Responsibility

Topics: Enron, Certified Public Accountant, Financial adviser Pages: 5 (1593 words) Published: August 19, 2013
Accountants Responsibility
Linda Herman
Professor Elaine Lerner
July 23, 2013

An accountant has a responsibility to act honestly, morally, legally, and ethically both professionally and personally. Even if an accountant is free of reproach or hint of wrong doing %he must also be free of wrong doing personally as a person’s personal life can and does carry over into their professional life and vice versa. In light of all of the business scandals in recent year’s consumers, shareholders, and government officials are taking a much harder look at accountants and auditors. Kent St. Pierre and James A. Anderson conducted an analysis as to what gets auditors and accountants into trouble. In their study they found that 28% of the errors involved errors in procedures while 72% of the errors involved interpretation of GAAP or GAAS (Pierre, 1984).

The post Enron debacle has brought about a vast amount of finger pointing as to who is tending the gate and minding the store. Who is going to watch over big business and protect the government, the client, and third parties? Many look to auditors and accountants to be the end all solution to fix the problem. The accountant/auditor is supposed to be both protector and whistleblower all in one, yet have watchful eyes examining every move to make sure no wrong doing occurs. Risk has increased as has demand with new regulations and stiffer penalties (Boatright, 2007 ). Accountants Responsibility to Clients

An accountant is responsible to provide his client with financial advice and to keep an accurate record of all financial activities. “CPAs will be viewed as fiduciaries, according to Walter M. Primoff, CPA/PFS, and former deputy executive director of the N.Y. State Society of CPAs and co-author of CPA Guide to Opportunity. “Like attorneys, [CPAs] have always bad more malpractice exposure than most others in the wealth management arena," be said. For tbis reason, it is important that CPAs perform the necessary due diligence before making a referral to a financial adviser or retaining an adviser when acting as a trustee. To this end, reviewing an adviser's newly mandated SEC disclosure documents can provide a wealth of key information. The documents serve as a road map for the CPA to follow to unearth comparable information from advisers who are not subject to these rules” (Jason, 2012).

Action or Claim Related to Clients
“In a New York case, accountants were held liable for aiding and abetting the breach of fiduciary duty by the board member defendants in view of the plaintiffs' showing that the accountants had complete knowledge of the misuse of condominium funds and were indispensable to the board member defendants in their efforts to conceal the misuse of those funds.

In another case, the plaintiff accused his accountant of falsely certifying that it had conducted each of its audits in compliance with generally accepted auditing standards. This allegation survived the defendant's motion to dismiss and the court allowed the merits of the breach of fiduciary duty claim to be meted out at trial. So how is this risk avoided? Sometimes it cannot he. An accountant may be exposed to a potential claim for breach of fiduciary duty even if she acts entirely ethically and in accordance with law. In other words, it does not require any criminal or unethical conduct on the part of an accountant for her to be sued on a fiduciary theory. Every engagement is unique, and whether the duty arises is based on the terms of that particular engagement.

Thus, a practitioner should be keenly aware of the type of services that are to be provided. Of course, it's not advisable for an accountant to immediately cease serving as a financial advisor to a client if that relationship has already been established. Often, certain engagements by their very nature will call for more than the mere preparation of tax returns. But one should at the very least stop...
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