Failure to Audit Financial Statements and Accounting Malpractice
Imagine you are the owner of a small business. You hire someone to keep your books, and trust that he or she will do the job honestly and correctly. At the end of each year, you hire an auditor to thoroughly examine your financial statements as another layer of protection for your business. What if the auditor gives you an “all clear” report, telling you there are no problems or deficiencies in your financial statements, but later you find out the financial statements were not properly audited at all?
As an example, assume your bookkeeper embezzled money and altered the financial statements to cover this embezzlement. The inconsistencies from that embezzlement should certainly have come to light during an audit. If your auditor was sloppy, lazy, or failed to audit your financial statements because of a relationship with your bookkeeper, you may be the victim of accounting malpractice. In fact, if the auditor deviated in any way from the accepted standards for auditors and other financial professionals, accounting malpractice may have occurred.
Auditors are required to gather information necessary to identify risks of material mis-statement due to fraud. These risks must then be assessed based on an evaluation of the programs and controls in place. Then the auditor must respond to the results of that assessment. Further, auditors must overcome the tendency to rely too much on representations made by, say, the bookkeeper for your company. In other words, auditors must exhibit “professional skepticism,” at all times during an audit.
In order to ensure a thorough audit is done, the auditor must take into consideration the risk factors for fraud within your business. To do this, the auditor must question you, the business owner, as well as others within your organization regarding bookkeeping procedures. Auditors, CPAs and accountants are bound by the standards set forth in the Financial Accounting Standards Board’s Generally Accepted Accounting Principles (GAAP) and the American Institute of Certified Public Accountants’ Generally Accepted Auditing Standards (GAAS).
Accounting malpractice is a growing problem in Washington DC and throughout the country. Many accounting malpractice lawsuits involve allegations of breach of fiduciary duty, fraud, or collusion. Yet, one of the most common allegations is conflict of interest while performing services for the client. Accountants, auditors, and other financial professionals have specific rules of professional conduct governing how situations involving potential conflicts of interest must be handled. A conflict of interest can occur when the accountant or auditor has a relationship with another person to the extent that it impairs the accountant’s objectivity. In the example above, such a conflict of interest would relate to a relationship the auditor had with your bookkeeper.
Some of the more common types of accounting malpractice include:
• Failure to properly audit financial statements;
• Failure to detect financial deceptions or misrepresentations;
• Failure to provide accurate and correct tax advice;
• Failure to comply with GAAP and GAAS standards;
• Flawed audits;
• Deliberate misstatements on internal financial audits, and
• Wrongful certification of financial statements.
If you feel you are the victim of accounting malpractice, it is important to speak to a knowledgeable Washington D.C. accounting malpractice attorney at the earliest possible opportunity.
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.