Accountant's Liability

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DEFINITION of 'Accountant's Liability'

An accountant's legal liability while performing professional duties. An accountant is liable for a client's accounting misstatements. This risk of being responsible for fraud or misstatement forces accountants to be knowledgeable and employ all applicable accounting standards. An accountant who is negligible in his or her examination of a company can face legal charges from either the company or investors and creditors that rely on the accountant's work.

INVESTOPEDIA EXPLAINS 'Accountant's Liability'

Accountant's liability adds an element of pressure to an accountant's performance of duties. An accountant's actual participation in a fraud can be hard to prove because management could be committing the fraud, which the accountant failed to notice. This makes the accountant legally liable for being negligent of fraud or misstatements, even if he or she had no direct hand in committing them.

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