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in what circumstances would a CPA be found liable for a preparer penalty when he or...

in what circumstances would a CPA be found liable for a preparer penalty when he or she has not actually prepared the return?

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Answer #1

CPAs and their clients enter into a contract with an agreement to perform certain services. Liability occurs when there is a breach of contract.[3] This applies to the CPA if they don’t perform what they stated in the engagement letter and the client suffers damages.

Professional negligence: Negligence may be viewed as “failure to exercise due professional care".[3] Both clients and third parties can sue CPAs for the tort of negligence, which is a wrongful act, injury, or damage for which a civil action can be brought

Statutory liability: CPAs have statutory liability under both federal and state securities laws. Statutory liability provides cover for defense costs, fines and penalties charged against the firm. Under statutory law, an auditor can be held civilly or criminally liable

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