• Accountants can be held liable for any misstatements or inaccuracies that occurred while auditing or preparing financial documents. Discuss the type of professional liability that might be incurred by the accounting entity found in one of the following scenarios:
  • Peter Partner (an accountant) signs a contract to audit the books of Icy Ice Cream, LLC, a chain of ice cream shops. The CEO of Icy Ice Cream and Peter Partner agreed that the audit would be complete by May 31, one week before a deadline to file the audited documents with the IRS. Mr. Partner missed the filing deadline and Icy was fined by the IRS for missing the deadline.
  • Big Corporation, Inc. (BCI) is a Fortune 500 company with publicly traded stocks, which means that its securities-related activities are subject to regulation by the SEC, subject to the Securities Act of 1933. BCI hired Andy Audy, CPA, to prepare financial statements that it must file, subject to the act. The members of BCIs board of directors provided Mr. Audy with the corporate documents required to prepare the financial statements. Under time pressure, Mr. Audy did not review all the documents he received. He submitted statements to the SEC and a week later BCI received a notice from the SEC informing them that they would be fined for failing to file accurate financial statements.
  • Bitsy Coen decided to sell her shares in a bitcoin company. It was her first time interacting with the SEC so she hired Stan Stocky, CPA, to file the required Notice of Proposed sale form with the SEC. Bitsy told Stan that she wanted to use an inflated value of the shares because bitcoin share prices were rising so fast that she didnt want to miss out on any profit between when the form was filed and the sale. Stan filed the form using the inflated value that Bitsy gave him.