The term “malpractice” strikes fear in the minds of many professionals… doctors, lawyers and accountants. For most people, their only interaction with an accountant occurs during income tax filing season. People make that once a year visit, drop off a box of receipts and that’s it. For many other people, however, their accountant is also a tax planner, adviser, business consultant and financial planner.
CPA’s commit malpractice when they deviate from a standard within the accounting industry. Examples include:
- missing filing deadlines resulting in penalties
- making errors on returns that result in penalties
- providing bad tax planning and accounting advice
- failing to file FBARs (Reports of Foreign Bank and Financial Accounts) for those with offshore accounts
- wrongfully certifying financial statements
- recommending impermissible welfare benefit plans (there is a growing number of claims against CPA firms who sold or “blessed” these 419 and 412(i) plans)
- failing to detect fraud
- payroll processing fraud
As the Internal Revenue Code becomes more complex, the chances for mistakes increases.
Luckily, most CPA firms carry insurance. While the local tax preparer who hangs his “Taxes here” sign on the street corner is usually not insured, CPAs generally are. Unless the actions of the accountant were intentional, their negligence and errors may be covered. Theft, embezzlement and fraud are not usually covered by insurance, however.
How Do I Prove Accounting Malpractice?
Simply because your accountant made a mistake or the IRS didn’t agree with deductions suggested by your accountant doesn’t mean that accounting malpractice took place. Think of a lawsuit, if the matter makes it to trial there is generally a winner and a loser. The attorney for the losing side probably isn’t guilty of malpractice, however.
There are several elements to a successful accounting malpractice claim. To win such a claim, you must prove:
- The existence of a professional relationship. (Simply because you spoke with an accountant doesn’t mean he or she is your accountant.)
- The accountant breached its duty of professional care. A breach might occur from the accountant failing to follow generally accepted accounting principles, state law, AICPA, or other standards (i.e., negligence) or failing to follow specific provisions in the accountant-client contract (breach of contract). An intentional wrongful act, such as embezzlement of fraud can be considered malpractice but is typically not covered by malpractice insurance.
- That the client suffers monetary losses.
- That there is link between the breach of duty and the client’s losses. (Simply because you lost money isn’t malpractice unless you can show it was the accountant’s misconduct that caused the loss.)
Claims must typically be brought within two to four years from the time the person filing a malpractice action knew (or reasonably should have known) of the accountant’s misconduct. In some states there may be as little as just 12 months to bring a claim.
How Much Does It Cost to Sue an Accountant?
We accept cases on either an hourly or contingency fee basis. the latter means we share the risks with you and do not get paid unless we win. In some instances we may consider cases on a hybrid basis.
If your accountant made a mistake that cost you money, don’t delay in seeking help. If the accountant does not immediately make you whole for all your losses, contact an experienced accounting malpractice lawyer.
The attorneys at Mahany Law represent victims of accounting malpractice and fraud. Brian Mahany has lectured and taught both. state and national CPA groups, Our unique experience can help you get back your hard earned money. For more information, visit our separate accounting malpractice site. You can also contact attorney Brian Mahany online or by email at
Mahany Law – America’s Fraud Lawyers.