“Embezzlement, defalcation, fraud. When these crimes occur, owners, board members, trustees, and receivers first cast aspersions against the bad actor,” writes Jonathan S. Ziss, a partner in Goldberg Segalla’s Professional Liability Practice Group. “Usually that flame burns out quickly due to lack of fuel. That is to say, in most of these scenarios the bad actor has already gambled, snorted, or in some other way dissipated the stolen money down to nothing.

“For this reason, prosecution, incarceration, and even court-ordered restitution typically do not right the wrong or heal the wound. The victim – your client – wants more. Often, they will want it from you.”

In the latest installment of Jonathan’s “Liability Lessons” published by the Pennsylvania Institute of CPAs, Jonathan explores a number of ways CPAs may protect themselves in such situations. He examines the important role of engagement letters and management representation letters; legal theories of contributory and comparative fault, reliance and causation, audit interference, and the in pari delicto defense; and how common sense and the power of storytelling can influence how a jury might consider a malpractice claim involving undetected theft.

Read the article here:

• “‘But It Was the Client’s Fault’ May Just Work,” Pennsylvania CPA Journal, Spring 2016