Question

explain two Federal laws that affect accountant's responsibility and liability from a legal and ethical perspective

Answer 1

Whether providing services as an accountant or auditor, he owes a duty of care to the client and third parties who foreseeable rely on the accountant's work. Accountants can be sued negligence in the performance of their duties, and for fraud.

An accountant opinions affect their clients and their judgments can further affect investors, stockholders, firm creditors, or even partners. Large public accounting firms perform thousands of audits annually. Ultimately they will find unmodified reports on financial statements that could appear to be misleading. If an accountant fail to modify the audit report on financial statements that are materially misstated, investors and firm creditors may experience substantial losses.

Taxpayers want the government to use their economic resources effectively and efficiently. There is also considerable debate as to whether the current generation of citizens should shift the costs for the benefits derived in the near term to future taxpayers (i.e., deficit spending to meet the current needs of the government). Thus, periodically assessing if the government’s financial position has improved or deteriorated is important not only from an economic perspective but also because it has social and political implications. The financial statements of the U.S. government and its agencies provide taxpayers and Congress a comprehensive view of how the government manages tax revenue and how effective the federal government is at providing services. The financial statements report the U.S. government’s financial position and condition, its revenues and costs, assets and liabilities, other responsibilities and commitments, and other financial issues. The U.S. government’s financial report is a means of communicating to multiple stakeholders, which are depicted in Figure 4. The Financial Report of the United States Government, issued by the Department of the Treasury, serves the same basic purpose as the annual report issued by a publicly traded company to its investors. Although the underlying accounting and auditing concepts in the federal government closely follow those in the private sector, the expected outcomes are different. Thus, financial reporting and auditing standards in the federal government have a different focus than in the private sector. The standard-setting body for federal financial reporting is the Federal Accounting Standards Advisory Board (FASAB). The standard-setting body for federal auditing standards is the GAO.

There are many laws and regulations that a reporting entity may have to comply with in order to continue in business. For example, many entities (particularly in the UK) will have to comply with strict health and safety legislation; a food manufacturer may have strict food hygiene legislation to comply with, and an accountancy firm will have a code of ethics to follow from its professional body. Such laws and regulations will have both a direct effect on the financial statements and an indirect effect

• compliance with the terms of an operating license
• compliance with regulatory solvency requirements, or
• compliance with environmental regulations.

The accountant must communicate with the next highest level of authority.

Laws related to money laundering issues where the criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activity, allowing them to maintain control over the proceeds and, ultimately, providing a legitimate cover for their sources of income.

Money laundering offences can include:

• concealing criminal property
• acquiring, using or possessing criminal property
• becoming involved in arrangement which is known, or suspected, of facilitating the acquisition of criminal property.

Hence laws and regulations will have both a direct effect on the financial statements and an indirect effect on an accountant’s responsibility.