Accounting Malpractice

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Accountants provide a wide range of finance-based advice and services including auditing, bookkeeping, and tax preparation. There are basically two kinds of accounting: financial and managerial. Financial accounting involves preparing financial statements that businesses use to show their financial performance to outside people such as investors, creditors, and customers.

Managerial accounting involves identifying, analyzing and presenting financial information internally to a business or individual for the purposes of planning and decision making.

Individuals and businesses can suffer great financial harm from errors made in both financial and managerial accounting. Accounting malpractice is where an accountant commits an error or deviates from accounting principles that causes a financial loss or other negative outcome for a client. Accountants have a duty to their clients to act within certain standards and to exercise due care in preparing tax returns, audits and other financial documents.

Frequently Asked Questions
What principles are financial accountants governed by?

Financial accountants usually must follow Generally Accepted Accounting Principles, also known as “GAAP.”The purpose of GAAP is to ensure that financial reporting is transparent and consistent from one organization to another. Depending on the location and scope of the services provided, other standards may also apply.

What are some examples of how an accountant could commit malpractice?

Generally, any act or omission by the accountant that is not what a reasonably prudent accountant would do in similar circumstances may potentially be malpractice. Some specific examples include errors in tax filings, providing incorrect tax advice, improper disclosure of information on a financial sheet, not disclosing a conflict of interest or failing to detect fraud during an audit.

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