Accountant's Liability

AAA

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.

BREAKING DOWN '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.

RELATED TERMS
  1. Privileged Communication

    Interaction between two parties in which the law recognizes a ...
  2. Accountant's Opinion

    A statement signed by an independent accountant outlining his ...
  3. Accountant

    A professional person who performs accounting functions such ...
  4. Liability

    A company's legal debts or obligations that arise during the ...
  5. Generally Accepted Accounting Principles ...

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

    A type of liability that does not exceed the amount invested ...
Related Articles
  1. Insurance

    Ancient Accounting Systems

    Learn how accounting evolved to keep records of increasingly complex transactions and civilizations.
  2. Professionals

    Financial Career Options For Professionals

    Find out if spreading your wings to try a new career will make you soar or fall flat.
  3. Personal Finance

    A Look At Accounting Careers

    More than just crunching numbers, this career blends detective work with trouble shooting.
  4. Fundamental Analysis

    Accounting For Differences In Oil And Gas Accounting

    How a company accounts for its expenses affects how its net income and cash flow numbers are reported.
  5. Professionals

    Financial History: The Rise Of Modern Accounting

    Find out how these two have grown hand-in-hand throughout our modern history.
  6. Professionals

    Financial History: The Evolution Of Accounting

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

    Mark-To-Market Mayhem

    Did this accounting convention contribute to the credit crisis of 2008? Find out here.
  8. Investing

    How To Calculate Minority Interest

    Minority interest calculations require the use of minority shareholders’ percentage ownership of a subsidiary, after controlling interest is acquired.
  9. Economics

    Explaining Replacement Cost

    The replacement cost is the cost you’d have to pay to replace an asset with a similar asset at the present time and value.
  10. Economics

    How Does National Income Accounting Work?

    National income accounting is an economic term describing the system used by a country to gather data and determine aggregate economic activity.
RELATED FAQS
  1. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  2. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  3. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  4. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  2. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  3. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  4. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  5. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  6. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
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!