Legal Developments and Risk Management Tips Impacting the Professional Liability Community.
According to media sources, including Bloomberg, the US Financial Accounting Standards Board (FASB) is adding crypto asset transfers to its agenda set for this week. What is the FASB? Founded in 1973, the FASB is an independent, private-sector, not-for-profit organization that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that … Continued
In a novel move, Big 4 accounting firm KPMG has taken the first step in seeking to own and operate a law firm in the United States. Although permitted in other countries, the United States generally prohibits non-lawyers from owning a law firm. In 2020, however, Arizona became the first state to relax that standard … Continued
Goldberg Segalla partner Christopher F. Lyon’s persistence earned a significant victory for both an accounting firm and accountant accused of professional negligence and fraud. The court granted reconsideration and upon reconsideration granted the motion for summary judgment, and the claims were dismissed in their entirety with prejudice. While an appeal is expected, this was a major … Continued
The Corporate Transparency Act (CTA) became effective as of January 1, 2024. According to Jonathan Ziss, co-chair of Goldberg Segalla’s Management & Professional Liability practice group, in an article recently published in the Pennsylvania CPA Journal, CTA compliance is critical to avoid the “unauthorized practice of law” and other professional liability concerns. Read Jonathan’s article … Continued
The Financial Accounting Standards Board (FASB) is seeking comments by Tuesday, June 6 on its newly proposed Accounting Standards Update (ASU). With the world of digital assets moving at lightning speed, the FASB’s proposed amendments are part of its ongoing efforts to update accounting standards for, and disclosure of, certain digital assets. WHAT IS THE FASB? The FASB, established in 1973, … Continued
Christopher F. Lyon – a partner in the firm’s Management and Professional Liability practice group – co-authored an article in ABA’s The Brief on the transition to remote work pre- and post-pandemic, and the new E&O risks associated with remote work in professional services. The article examines the shift to remote work for professionals including lawyers, insurance brokers, and financial-service … Continued
We often write about the importance of engagement letters, in fact we have an entire sub-category devoted to engagement letter defenses. That’s because the engagement letter is the first line of defense. A letter that clarifies the accountant’s obligations, scope of duties, identity of the client, billing terms and other key clauses is generally a … Continued
Similar to the fallout from Enron, the Great Recession of 2007 saw many accounting firms back in the cross-hairs for allegedly failing to warn of the impending financial doom. Many of these entities (turned plaintiffs) were massive companies with billions in assets, leading to protracted and expensive litigation. While some cases settled to avoid further legal costs, one major accounting firm was recently found liable for violating audit standards for one of its major bank clients prior to the Great Recession. The presiding judge is now set to proceed to the damages phase of the trial, where it will be determined the extent to which damages were caused by the violations.
One of the most common problems facing a would-be plaintiff considering a malpractice case is when to file suit. Similarly, those that defend professionals must consider whether to move to stay proceedings if applicable. Especially with accountants and attorneys, causation and damages are difficult to calculate until the underlying matter has concluded. This means that the notoriously long legal process can often come into conflict with the statute of limitations, or create evidentiary problems. The decision is whether to wait many years for the underlying action to conclude and damages to materialize, or continue with the malpractice action in the midst of unresolved issues although the facts are still fresh in witness’s minds. In a recent Texas appellate decision, the court ruled that the case should proceed immediately.
Most jurisdictions require that a plaintiff establish allegations of accounting malpractice through expert testimony. Moreover, accounting experts are often relied upon to establish damages. Accordingly, the vast majority of litigators, even those outside of the malpractice community, will encounter a CPA expert witness. This may be daunting for attorneys. Fortunately, there’s a handy, but underutilized, guide. The special reports to the AICPA Code of Professional Conduct include ethical standards required of every CPA. The reports provide a readymade guide for evaluating the efficacy and admissibility of a CPA expert’s testimony. Using these standards as a benchmark should help practitioners retain and oppose an accounting expert.