An accountant should provide the true financial position of their clients. Privacy is not a requirement for a particular action causes in instances where the defendants are purposely dishonest to a plaintiff. An accountant should never certify a balance sheet that is false and fraudulently altered with figures. Suppose the accountant deliberately authorizes a dishonest balance sheet with the knowledge that this balance sheet is base on the third parties to provide credit or offer loans. In that case, such accountants are held liable for the fraud performed to the third parties as they have relied upon the misinformation shared. There have been changes in rule in the perspective of governing liability to third parties in instances of misinformation shared. Initially, accountants were not held liable for negligence. However, due to an increase in instances of misrepresentation of financial position, limitations were gradually debilitated. The doctrine of not being held liable was revoked when negligence was probable to put human life in danger. The rule was further weakened because when a product is manufactured, the manufacturer should be cautious that the product is not causing characteristically dangerous harm or injury to the user. However, suppose the manufacturer negligently manufactures the product, and it causes a threat to the user’s life. In that case, the manufacturer shall be held liable for the damages caused to the buyer.
Auditor’s Liability
There has been much litigation filed against the accounting firms. The investors and creditors filled the cases because they have suffered financial losses due to the accounting firms of the defendant. The accounting firms fail to report the important information about the financial position of the companies whose books are being audited by the accounting firms. The accounting firms shall become the sole reason for the losses incurred to the investors and creditors. If the correct representation of the defendant’s financial situation had happened, the financial loss could have been avoided. The auditors and public accountants should be vigilant to provide correct details or be held liable for the potential loss caused to the third parties. The auditors and public accountants should follow few measures to manage the corresponding risk due to legal liability.
The terms of the arrangement for the companies whose books are being audited by the accounting firms should be identified.
Tasks to be undertaken for reporting the correct financial position should be defined.
The companies whose books are being audited have few responsibilities to share the requested details with the auditors and public accountants. These responsibilities can be defined.
Work limitations can be specified to avoid future risks.
The purpose of reporting can be put forward to the companies whose books are being audited.
Ensuring only the intended recipients have access to the accounting reports.
Reducing the possibilities of third-party liability.
