Question

How Bankruptcy Law and Corporation Law affect accountant's responsibility and liability from a legal and ethical perspective? Please explain in details.

Answer 1

BANKRUPTCY LAW

Bankruptcy accounting service demand is growing very fast and hence there is a need for professionals for such type of service. In the past there have been many cases of companies filing for bankruptcy and cases being pending before the court. Procedures have been made complex and a lot of documents are required for it.

A bankruptcy code has to be followed and it requires debtors to pay for the stakes of various stakeholders. Accountants are in better position to understand the Debt. position of the company and can provide us with a valid reason to go for bankruptcy. They are the ones who can read the reports and suggest to go for bankruptcy before position diminishes further.

Responsibilities and liabilities :

1. Fair valuation of assets.

2. Financial statements recording and maintaining

3. Act in their best capacity

4. Provide all information that can be useful for court

5. Implement their specialized knowledge and skills

6. Examine various books of accounts

7. Submit reports formed to various parties (Reports include Information sources, findings & conclusions, recommendations etc.)

Liability

1. He is responsible for the books of account formed by him

2. He has to act for the court.

3. He has to make sure that no misrepresentation by the company is there.

4. He has to act as an auditor and check company's records.

CORPORATE LAW

Corporate law as the name suggests deals with the formation and operations of corporations as a business entity separate from its owners.

Accountants owe a duty to its clients and various stakeholders. They are required to use their skills in accounting and can be sued for negligence if any on their illegal and unethical conduct. Work of accountants affect decisions of various parties. They are required to form reports which are not misleading. They may at times receive reports which are incorrect or have been manipulated but they are required to access the correct position.

Liability

Accountants have common law and statutory law liability which arise from negligence and laws of society. They have a liability to clients and have to perform duties with utmost care. Not only to clients, accountants are also accountable to third parties.

Responsibility

Accountants are given responsibility to prepare financial reports of the organization they are working for. These reports should be made in a legal and ethical way i.e. they show the true picture of the organization. These reports are generally annual and have to be regularly updated to provide all the information. All the expenses and receipts should be thoroughly checked to prevent unnecessary losses. There should not be any liabilities in balance sheet which are created to commence frauds.