DEFINITION of 'Accountability'

The responsibility of either an individual or department to perform a specific function in accounting. An auditor reviewing a company's financial statement is responsible and legally liable for any misstatements or instances of fraud. Accountability forces an accountant to be careful and knowledgeable in their professional practices, as even negligence can cause them to be legally responsible.

BREAKING DOWN 'Accountability'

An accountant is accountable for the integrity and accuracy of the financial statements even if errors were not made by them. Managers of a company may try to manipulate their company's financial statements without the accountant knowing. There are clear incentives for the managers to do this, as their pay is usually tied to company performance. This is why independent outside accountants must review the financial statements, and accountability forces them to be careful and knowledgeable in their review.

  1. Credit Card Accountability, Responsibility ...

    This act was designed to limit the manner in which credit card ...
  2. Accountant

    A professional person who performs accounting functions such ...
  3. Health Insurance Portability And ...

    An act created by the U.S Congress in 1996 that amends both the ...
  4. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  5. Liability

    A company's legal debts or obligations that arise during the ...
  6. Limited Liability

    A type of liability that does not exceed the amount invested ...
Related Articles
  1. Bonds & Fixed Income

    Tales From Wall Street's Crypt

    Wall Street continues to attract fresh hordes of ghoulish people committing the same old crimes.
  2. Investing Basics

    Playing The Sleuth In A Scandal Stock

    Learn the legwork involved in finding out whether your investment can weather a storm.
  3. Mutual Funds & ETFs

    Team Players Vs. All-Stars For Mutual Fund Management

    Mutual funds vary in terms of their management structures and one size generally does not fit all investors.
  4. Personal Finance

    A Look At Accounting Careers

    More than just crunching numbers, this career blends detective work with trouble shooting.
  5. Professionals

    Financial History: The Evolution Of Accounting

    Follow accounting from its roots in ancient times to the profession we now depend on.
  6. Options & Futures

    Uncovering A Career In Forensic Accounting

    Does a job as a financial sleuth sound interesting to you? Dig in to learn more.
  7. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  8. Economics

    Explaining Appreciation

    Appreciation refers to an increase over time in the value of an investment or asset.
  9. Economics

    Calculating Long-Term Debt to Total Assets Ratio

    A company’s long-term debt to total assets ratio shows the percentage of its assets that are financed with long-term debt.
  10. Economics

    Explaining Like-for-Like Sales

    Companies use like-for-like sales figures to compare sales volume from one period to another.
  1. Do dividends affect working capital?

    Regardless of whether cash dividends are paid or accrued, a company's working capital is reduced. When cash dividends are ... Read Full Answer >>
  2. Do prepayments provide working capital?

    Prepayments, or prepaid expenses, are typically included in the current assets on a company's balance sheet, as they represent ... Read Full Answer >>
  3. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  4. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>
  5. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>
  6. Are dividends considered an expense?

    Cash or stock dividends distributed to shareholders are not considered an expense on a company's income statement. Stock ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  2. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  3. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  4. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  5. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  6. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!