Many types of professionals have a responsibility to those they serve to do their job to the best of their ability and to act honestly and according to specific regulations for their industry. When someone is harmed because they failed to live up to these responsibilities, that person may be able to take legal action against them.
In fact, these professionals’ negligence and errors can be considered malpractice. Those terms don’t solely apply to those in the medical profession, even though medical malpractice is the type that most people know about. Those in any kind of financial field, for example, can cause considerable harm when they don’t do their job as they should. Let’s look briefly at what can make a certified public accountant (CPA) guilty of malpractice.
In addition to tax preparation services, CPAs manage assets for both individuals and businesses and often guide them in financial planning. While most CPAs don’t have direct access to their clients’ money, clients often rely on their advice. That means an unqualified or dishonest CPA can cause significant financial harm.
Conflicts of interest
CPAs have a responsibility to look after their clients’ interests. That means staying away from any conflicts of interests that might cause them to do something that benefits themselves or another party to the detriment of their clients.
Examples of conflicts of interest to be avoided are:
- Investing in a client’s business
- Investing with a client in another business or other investment opportunity
- Working to help one client over another in any kind of dispute (from a couple’s divorce to a business partnership dissolution)
- Making a “handshake” deal or verbal agreements
Reputable CPAs will document every action – from the initial client engagement letter to any termination agreement and all transactions in between.
It’s important to understand that investments, economic conditions, interest rates and more can fluctuate. Sometimes, even the best financial advice doesn’t pan out because of unforeseen circumstances. That doesn’t necessarily make a CPA guilty of malpractice.
If a CPA has made serious errors, been negligent, lied or failed to disclose something to a client or done anything unethical that has caused a client to suffer financial losses, they may be able to hold them liable in order to seek compensation to cover those losses and potentially other damages. Getting the appropriate legal guidance can help people determine whether they have a case.