If you own a business, it's critical to have good support services, including an accountant. You also need to be able to rely on that accountant to meet certain minimum standards that are at least level with any other member of the profession.
When an accountant fails to meet those minimum standards, that's a type of professional malpractice known as negligence. Unfortunately, if you don't recognize the signs that it's happening, accounting negligence can end up costing your business a lot.
What counts as accounting negligence? Some of the problems you might encounter include:
- Incorrect information on internal financial records or audits
- Improperly prepared tax returns
- Tax returns or other tax paperwork that isn't filed properly or in a timely manner
- Tax advice that is wholly inaccurate or outdated
- Inaccurate advice regarding necessary bookkeeping activities
- Failing to properly maintain the financial records for the business
Sometimes you may not be able to detect an issue right away, but you should be particularly concerned if there are entries in the books that you don't understand and your accountant can't easily explain them. Your accountant should be able to show you exactly where money is entering and exiting the business.
Another red flag is missing money. If, for example, an employee is caught stealing funds through embezzlement, you should question why your accountant wasn't able to spot the missing money -- particularly if the money was taken over a significant period of time.
Similarly, you should never hear excuses from an accountant about missed deadlines or outdated information. It's the accountant's job to keep up with tax deadlines, filing requirements and changes in the laws and regulations. Anything less is well below the minimum professional standards of care you should expect.
Accounting malpractice is no small matter. There should be no second chances if your accountant seems unable to do his or her job. Aside from wasted money, you risk issues like fines and audits -- which could actually cripple your business.