Accountants’ Liability
In one of my classes, we are required to bring in articles each class to stimulate class discussion. I brought in one of the front-page articles from CFO.com “Could New Regs Bring More Lawsuits?”
That link is most likely quite temporary folks, as the permalink function gave me an error message when I tried to use it. So click away quickly.
Anyway, after learning last semester in audit class about auditor liability, this article brings up some scary stuff for accountants.
Essentially, the article says that these proposed regulations will make it easier to sue third parties (banks, auditors, accountants, suppliers even) involved in some way with fraudulent companies.
It’s a bit scary to think that, as an auditor, there is no surefire way to stay out of trouble. You can perform your work as diligently and honestly as possible, and yet still be opening yourself up to lawsuits. And unlike doctors, who can purchase insurance to protect themselves when something goes wrong, there is no insurance policy for not figuring out that your client is committing fraud!
Does anyone have a more detailed (yet simplified) explanation of these new regs? (The article doesn’t really explain the regulations, just what the writer considers the potential outcomes.)
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“knowingly or recklessly provides substantial assistance”
Kel this is from the article on the CFO.com where do u draw the line and if it is going to cover the auditors and the suppliers …if both of them are doing their job correctly and due to fraud on part of management then why do you hang the auditors,bank’s and for god’s sake the suppliers …
i do not think any poor supplier would be fool enough to give his goods on credit or otherwise to a firm which is indulging in fraudulent practices… unless the supplier himself is a fraud..
and if i am a loan officer and i loan an amount to a firm which is honest but after some time if the owner who has an excellent record becomes rogue then who is to be blamed..
May be banks would also appoint an Psychic who would look at the crystal ball and approve loans… haha
yes there are bad apples everywhere ,and i feel the US financial system has enough regulatory checks and balances… what we need is more positions in the existing regulatory agencies …and more resources for them…
and Kel here is the summary of the bill i guess i googled and found it on senate banking committee webpage
http://banking.senate.gov/public/_files/FinancialReformSummaryFC11189.pdf