Research Paper – Accountant Responsibility
Introduction
Accounting by definition is “The bookkeeping methods involved in making a financial record of business transactions and in the preparation of statements concerning the assets, liabilities, and operating results of a business” (The American Heritage). An accountant’s responsibility is not something that is equally split or separated by category. It is not something that can be defined easily or without a lot of research and thought. An accountant responsibility is said to be between their clients, third parties, and the government itself, but it is also a personal responsibility. An accountant takes trust into their hands from others, and what is done with that trust is how an
Dentinger, CPA gives an example of accountants not holding up the responsibilities to their clients. Both of these accountants were a part of an audit for ILC Technology and the opinion of the audit was not that of a qualified auditor (Sec.gov). To give a client an audit knowing it was not a qualified auditor however it did not give an unqualified opinion. The issue here is that the company was given the wrong information by the CPA and therefore the company’s engagement letter with the firm was violated and the CPA’s in question “breached his duty to his client by failing to exercise the degree of skill and competence that an ordinarily prudent accountant would under the circumstances” making the firm negligent (Beatty & Samuelson, 2010, pg. 379). • Responsibility to third parties The largest case to date that has to do with third parties and an accounting firms responsibility to that third part was the one whom the rule was written after. “In Ultramares, Touche, Niven & Co. had conducted an audit of Fred Stern & Co. Stern, seeking a loan, later provided a copy of the audit report to a potential creditor. The creditor provided the loan and when Stern failed, the creditor sued Touche to recover its loss. In its opinion, the court declined to hold the accounting firm liable to an unknown third party who relied on the audit report. In his famous statement, Judge Benjamin N. Cardozo distinguished accountants from others and set forth the