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January 2011

Accountants' Liability in Compiling Financial Statements

Why the Disclaimer in Compilation Reports Doesn't Always Work—and What to Do About It

When does an accountant who compiles financial statements—and who gives no assurance—face liability? There are some simple and clear situations, but there's also one that's not so straightforward. The simple and clear situations involve the client suing the compiling accountant. Such situations include the client suing the accountant for breaching the engagement agreement by not doing the job as promised; the accountant's failure to warn the client about errors, fraud, or illegal acts that become evident during the compilation; and the failure to express doubts about the client's ability to continue as a going concern (AICPA Statement on Standards for Accounting and Review Services [SSARS] 19, Compilation and Review Engagements.

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