Research Paper – Accountant Responsibility
Accounting by definition is “The bookkeeping methods involved in making a financial record of business transactions and in the preparation of statements concerning the assets, liabilities, and operating results of a business” (The American Heritage). An accountant’s responsibility is not something that is equally split or separated by category. It is not something that can be defined easily or without a lot of research and thought. An accountant responsibility is said to be between their clients, third parties, and the government itself, but it is also a personal responsibility. An accountant takes trust into their hands from others, and what is done with that trust is how an accountant makes their name. A choice will always have to be made one way or another but the choice should maintain your reputation as a trust worthy, ethical, and legal accountant. When you think of scandals in the accounting industry, what actions come to mind that causes the scandals in the first place? When accountants lie about statements or try to hide money, add money, or change money, usually for the benefit of themselves and others such as CEO’s, right? Well those are what require regulation from the government and accounting responsibilities to be reevaluated. Over the past few years we have seen the economy go from a feeling of reaching new heights, to the lowest of lows and with that came the accounting scandals and the need to expand government regulation. In response to the changes in the economy the public wanted accounting standards and government regulation to assist in alleviating the way financials were being reported so the money that was being lost wasn't nearly as detrimental as it looked. The changes in the economy required changes in regulation. The changes in regulation set the need for accountant responsibility to be expanded. This paper is to go into details about the “three major parties” that accountants have a responsibility to; their clients, third parties, and the government. • Responsibility to clients
An accountant’s contract between their clients and themselves is called an engagement letter (Beatty & Samuelson, 2010, pg. 379). This letter is the legal responsibility an accountant has and can specify exactly what an accountant is supposed to do for a company or client. A client needs to prove two things in order for their accountant to be liable for negligence; the accountant breached his duty to his client by failing to exercise the degree of skill and competence that an ordinarily prudent accountant would under the circumstances and the accountant’s violation of duty caused harm to the client (Beatty & Samuelson, 2010, pg. 379). With these statements covering the legal aspect of the accountant’s responsibility to their clients the next portion will stick to the ethical concerns one of which can also be considered a legal concern, fraud. An accountant has a choice to make when they come to work each day. They can choose to tell the truth and have a successful career ahead of them, or they can choose to lie, cheat, or steal and be found guilty. An accountant is liable for fraud if (1) he/she makes a false statement of fact; (2) he/she either knows it is not true or recklessly disregards the truth; and (3) the client justifiably relies on the statement (Beatty & Samuelson, 2010, pg. 380). • Responsibility to third parties
“Accountants who fail to exercise due care are liable to (1) anyone they knew would rely on the information; and (2) anyone else in the same class” (Beatty & Samuelson, 2010, pg. 381). This makes the third party in question mean just about anyone besides the government or the clients. The biggest responsibility through a third party in general will be to the public. Professional accountants owe their primary loyalty to the public interest, not just to their own financial interests, company directors or management, or...
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