Auditor Liability :: Business Accounting

Auditor LiabilityRecently, the question of financial obligation has become more prevalent in the practice of macrocosm accounting. The AICPA has been lobbying for liability iron out in cases involving negligence or malpractice by public accountants. Opposition to this lobbying has come from consumer advocacy organizations, trial lawyers associations, and state public interest groups to name a few. (Bolinger p. 53) The key to victor for the AICPA, according to Gary M. Bolinger is creating an image as a, profession performing high-quality services but faced with excessive liability burdens that harm the public interest. (Bolinger p.56)One should not be concerned, however, in the pending political outcome, but in weighing the evidence argued by both sides and maturation a sound reasonable basis. Therefore, the remainder of this entry shall concern itself with comparing the prevalen t business lines of both sides against one another and drawing a conclusion found on the eviden ce. Opponents of liability reform rely heavy on an idealistic constitutional argument as well as an economic argument to nurture their point. The main components of their argument are as follows close recovery of loss has a detrimental transaction on thosewhich are harmed by alleged negligence. The speak to of liability is reasonable when compared to total revenues, and in igniter of a CPAs public responsibility. Indemnity insurance spreads take chances in the aggregate therefore removing the element of risk at the f irm level. The threat of litigation provides public accountants with a deterrent against negligent work. Finally, the results of lawsuits cause the profession itself toimplement new standards. (Bolinger p.54)The AICPA and its supporters have developed their argument based on continued liabilitys likely effect on the profession as well as an economic argument. The arguments in favor of liability reform include the effect of continued liability on the availab i lity of CPA services. The likelihood of fee increases resulting from liability risk. The threat of the inability of public accounting to obtain and agree qualifiedindividuals. (Bolinger p.56) Finally, the complexities involved in the audit engagemen t and the subjective decision making process versus the ability of a given jury to understand and bill a fair decision in such(prenominal) cases. After examining the arguments of both sides one will see that litigation in its current form is a hindrance to the accou nting profession as well as society, and the benefits provided by litigation areAuditor Liability Business AccountingAuditor LiabilityRecently, the question of liability has become more prevalent in the practice of public accounting. The AICPA has been lobbying for liability reform in cases involving negligence or malpractice by public accountants. Opposition to this lobbying has come from consumer advocacy organizations, trial lawyers associations, and state public interest groups to name a few. (Bolinger p. 53) The key to success for the AICPA, according to Gary M. Bolinger is creating an image as a, profession performing high-quality services but faced with excessive liability burdens that harm the public interest. (Bolinger p.56)One should not be concerned, however, in the pending political outcome, but in weighing the evidence argued by both sides and developing a sound reasonable basis. Therefore, the remainder of this document shall concern itself with comparing the prevalen t arguments of both sides against one another and drawing a conclusion based on the evidence. Opponents of liability reform rely heavily on an idealistic constitutional argument as well as an economic argument to foster their point. The main components of their argument are as follows Limiting recovery of loss has a detrimental effect on thosewhich are harmed by alleged negligence. The cost of liability is reasonable when compared to total revenues, and in light of a CPAs public responsibility. Indemnity insurance spreads risk in the aggregate therefore removing the element of risk at the f irm level. The threat of litigation provides public accountants with a deterrent against negligent work. Finally, the results of lawsuits cause the profession itself toimplement new standards. (Bolinger p.54)The AICPA and its supporters have developed their argument based on continued liabilitys likely effect on the profession as well as an economic argument. The arguments in favor of liability reform include the effect of continued liability on the availab ility of CPA services. The likelihood of fee increases resulting from liability risk. The threat of the inability of public accounting to obtain and retain qualifiedindividuals. (Bolinger p.56) Finally, the complexities involved in the audit engagemen t and the subjective decision making process versus the ability of a given jury to understand and levy a fair decision in such cases. After examinin g the arguments of both sides one will see that litigation in its current form is a hindrance to the accou nting profession as well as society, and the benefits provided by litigation are