Accountant liability involves the interplay of professional standards governing financial reporting and services rendered by accountants1 and a network of overlapping—and not always consistent—laws. Professionals involved in accountant liability matters will investigate facts regarding the use and misuse of financial information, analyze the operative guidance, and assist counsel with a complex allocation of responsibility for alleged financial reporting deficiencies or failures. The complexities of accountant liability issues make practice in this area challenging both for those prosecuting and those defending claims.
This chapter outlines the types of accounting services that can become the subject of litigation. It examines the law and some of the legal issues likely found in any accountant liability litigation. It discusses underlying trends in accountant liability and, in particular, an important evolution of responsibility for financial reporting that began in the mid-1980s and continues. The chapter also analyzes typical strategies and arguments used by plaintiffs and defendants in accountant liability litigation. Finally, the chapter addresses the role of accountants as experts in litigation that involves alleged accountant liability.
The early 2000s saw revelations of the largest financial scandals in American business history, such as Enron, WorldCom, and Tyco. Subsequently, a series ...