Accountant's Liability

Potential legal obligation of an accountant who commits fraud or is grossly negligent in the performance of professional duties. The term typically applies when an auditor conducting the Attest Function does not employ Generally Accepted Auditing Standards (GAAS) with sufficient care. To avoid liability, the accountant must be knowledgeable about the accounting profession's authoritative pronouncements such as Fasb statements and AICPA Statements on Auditing Procedure as well as SEC Accounting Series Releases. An accountant who violates the established rules and guidelines can be held legally liable to parties retaining him and those relying on work performed (e.g., investors, creditors). Most accounting practitioners carry malpractice insurance. See also Negligence.