All businesses face some type of risk, but a few industries, such as accounting, face unique risks that can sometimes lead to detrimental consequences. Liability in accounting comes in many forms. The following are some of the top sources of liabilities faced by accountants under common law.
Liabilities Under Common Law
This type of liability in accounting is when the responsibility is imposed on a party because of the person’s actions or negligence. Here are the three parts:
- Fraud: An act of deliberately deceiving in order to obtain unlawful or unfair gain over another. There are several types of fraud including internal, external, or fraud done to an individual. To prove it there must be intent and damages.
- Negligence: Failure to exercise and act with care, which may result in causing harm or miscalculations. Accountants should always take great care in acting legally so as not to cause intentional or unintentional harm to a client.
- Breach of contract: Liability occurs when there is a breach of contract and the client suffers damages. It is important for accountants to honor any and all terms of a binding contract, which will hold weight in court.
As an accountant, your professional advice will affect the decisions your clients make. In order to protect yourself from these and other liabilities, it is important to insure yourself with good accountants liability insurance.