IRS Warns CPAs: Beware of Phishing

Businesses are increasingly becoming the targets of sophisticated cyber-attacks, and professionals are no exception.  When cyber-criminals breach a professional service firm, they not only may gain access to the firm’s corporate data, but also confidential information from the firm’s clients.  Therefore, it is incumbent on all professionals to make data security a priority.

In order to combat this threat, the IRS recently issued a warning to accountants and tax preparers about a new phishing scam intended to access professional and client information.  The phishing …

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CPA Takes Advantage of Procedural Quirk

The idiosyncratic nature of the Louisiana legal system is one that is noted, if not explored, in many law schools around the country.  Even as early as high school, many teachers will explain that Louisiana is unique insofar as its legal system is based primarily on Spanish and French civil law, rather than the British tradition used in the other 49 states.  The differences between Louisiana and the rest of the country do not end there, however, and a large accounting firm was recently successful …

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When Does the Clock Start?

The application of the statute of limitations affirmative defense is theoretically simple, yet practically complex.  Often, the issue is when does the clock start; i.e. when does the claim accrue. The result varies by state and may come down to the specific fact pattern. The water may be muddied further if the plaintiff incurs more than one injury. This is relevant to the professional malpractice community. Take for example a recent California accountant malpractice case involving state and federal audits and $10 million on the …

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Auditor Dismissed from $50 Million Securities Class Action Suit

In a decisive win for the malpractice community, an independent auditor achieved dismissal in a securities fraud class action lawsuit by way of a 12(b)(6) motion. The Middle District of PA dismissed some of the claims against a troubled bank and all claims against the bank’s public offering underwriter and its outside auditor. The court accepted the auditor’s arguments that the plaintiff had failed to establish the requisite element of scienter necessary to maintain a securities fraud claim and, moreover, had failed to properly plead …

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Auditor Has No Fiduciary Duty to Company

In a widely watched and long-awaited decision, the North Carolina Supreme Court definitively determined that an independent auditor has no fiduciary duty to the company, overturning a 2014 Court of Appeals decision finding that such a duty existed. The court, however, was evenly divided on the issue of whether the company’s claims were barred by the defenses of in pari delicto and contributory negligence, leaving undisturbed (albeit without precedential value) the Court of Appeals’ decision that the defenses did not bar the remaining claims. Certified …

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SEC Big 4 Settlement: CPA is Too Close to the Client

Eager young accountants – all professionals, really – often set high goals, but the most common endgame for most is to become a “rainmaker.” Those who build significant relationships and turn leads to a regular stream of business are often in a position to excel professionally. While perceived expertise in a particular field is a must, it is often the relationships that set these partners apart.  But when does a relationship become so familiar that a CPA may lose his independence? The SEC recently weighed …

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Faulty Audit Lands Accountant in Hot Water

The most common forum for malpractice claims is civil litigation. However, a professional may find himself in a potentially worse situation if the appropriate professional regulatory board also gets involved. Take for example a recent case of accounting malpractice that demonstrates the serious side effects that can occur when an accountant falls short of the standards of the profession.

In the underlying matter the SEC permanently suspended Accountant from appearing and practicing before the SEC for conducting a faulty audit of its client, a public …

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Lessons from Largest U.S. Tax Fraud in U.S. History

If you are in the world of finance, accounting or tax chances are you have probably heard of Sam Wyly and his late brother Charles Wyly.  In recent years, the business mogul brothers have been the hot topic of litigation as they battled with the IRS and SEC over alleged tax and securities fraud that may have spanned decades.  In the most recent decision to come out of the Wyly saga, Sam Wyly was ordered by a Dallas bankruptcy court to pay $1.1 billion in …

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In Pari Delicto Not Enough to Save an Accountant

In the face of corporate fraud and deceit, it is not uncommon for the defrauded entity to turn on its professionals. The inevitable issue becomes who is responsible for overseeing the enterprise: the business entity or the independent professional? Perhaps both. The in pari delicto affirmative defense can be an effective tool for professionals to shield themselves from liability arising from alleged wrongdoing of their underlying client. For example, we previously posted a victory for an accountant who successfully asserted the defense here. But, …

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Tax Consequences of Employee Wellness Programs

Employee wellness programs are all the rage.  While the concept is still relatively new, the potential implications of such programs are still being ironed out.  Consider for example our recent post about how such plans can comply with other existing federal regulations.  As employers struggle to make sure that their programs comply with existing regulations, another aspect of the employer wellness programs cannot be forgotten: taxes. The potential tax implications for both the employer and employee are an important aspect of any wellness program.  In …

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