Accounting Malpractice Overview
Individuals and small businesses often turn to accounting firms and financial advisors to protect their financial interests. Sometimes these professionals can make serious mistakes with your money which causes you to lose thousands—or hundreds of thousands—of dollars. When an accountant, CPA, or financial advisor is negligent in the way in which they keep your books, prepare your taxes, or offer financial direction or tax advice, accounting malpractice may have occurred.
Accounting malpractice claims are becoming more and more common in Washington D.C. PricewaterhouseCoopers (PwC), one of the Big Four auditors, as well as the world’s second-largest professional service network, is currently facing a $1 billion accounting malpractice lawsuit from MF Global Holdings Ltd., and another similar accounting malpractice suit on behalf of Colonial Bank. Allegations are that PwC failed to advise MF Global to account properly for its European debt holdings and missed “huge holes” in Colonial’s balance sheet. While the companies claiming accounting malpractice are hardly small businesses, these lawsuits show that accounting firms must be held accountable for negligence. It also shows that accounting malpractice can occur on any level.
Determining Whether Accounting Malpractice Has Occurred
In order to prove accounting malpractice in Washington D.C., you must have a relationship involving a contract with your financial professional. (In some cases third-party liability may exist with no contract.) The standards of care for financial professionals can be found in the Financial Accounting Standards Board’s Generally Accepted Accounting Principles and the American Institute of Certified Public Accountants’ Generally Accepted Auditing Standards.
In short, a professional accountant has a duty of care and responsibility to the client. Should the accountant engage in negligent activity, a legal claim or lawsuit for violation of accounting industry rules may exist. To bring an accounting malpractice claim, you must have suffered financial loss and must prove the accountant’s breach of duty was the cause of that financial loss.
Simple Negligence vs. Gross Negligence
Simple negligence on the part of a financial professional includes errors that an average, reasonable accountant would not make. These errors might include:
• Poorly kept financial books
• Accounts receivable errors
• Incorrect advice on accounting matters
• Mistakes on tax returns
• Faulty estate planning advice
• Faulty audits
• Failure to detect fraud
• Wrongful certification of financial statements
Gross negligence includes more serious errors, which deviate significantly from accepted accounting standards. Some examples of gross negligence include:
• Violations of federal and state securities laws by auditors
• Tax fraud and tax evasion
• Deliberate deviations from GAAP, GAAS and PCAOB rules
• Billing fraud
• Manipulating reports to impact stock value.
Requirements for Accounting Professionals
Accounting professionals are required to maintain a “professional skepticism,” regarding risk factors which can potentially contribute to fraud, particularly when conducting financial information audits. If you believe you are the victim of accounting malpractice, it is important to take action in a timely way. Speaking to an experienced accounting malpractice attorney is an important first step. In Washington D.C., there is a three-year statute of limitations for filing an accounting malpractice lawsuit (the legal deadline clock begins to run on the day you knew or should have known of the harm), so speak to an attorney sooner, rather than later.
Click on the links below to learn more about specific types of accounting malpractice:
Contact Accounting Malpractice Lawyers
At Patrick Malone & Associates, our accounting malpractice lawyers understand the seriousness surrounding accounting malpractice. As experienced malpractice lawyers, we have represented individuals and small businesses in the Washington, DC metro area, Virginia, and throughout the State of Maryland. Our Washington DC accounting malpractice attorneys work tirelessly from the very start to ensure that all our clients receive the compensation they need to offset the wrongs that have been done to them. Call us at 1-202-742-1500 or 1-888-625-6645 or fill out our confidential contact form for a FREE Consultation and review of your case.
The accounting malpractice attorneys at Patrick Malone & Associates have successfully represented injured individuals in Washington, DC, Arlington, Alexandria, Annapolis, Rockville, Baltimore, Richmond, Fairfax, Montgomery County, Prince George’s County, and other locations throughout Maryland and Virginia.