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Auditor Liability Throughout the Eighties and into the Nineties the question of liability has become more prevalent in the practice of public accounting Recently the AICPA has been lobbying for liability reform in cases involving negligence or malpractice by public accountants Opposition to this lobbying has come from consumer advocacy organizations trial lawyers associations and state public interest groups to name a few Bolinger p 53 The key to success for the AICPA according to Gary M Bolinger is creating an image as a profession performing high-quality services but faced with excessive liability burdens that harm the public interest Bolinger p56 One should not be concerned however in the pending political outcome but in weighing the evidence argued by both sides and developing a sound reasonable basis Therefore the remainder of this document shall concern itself with comparing the prevalent arguments of both sides against one another and drawing a conclusion based on the evidence Opponents of liability reform rely heavily on an idealistic constitutional argument as well as an economic argument to foster their point The main components of their argument are as follows Limiting recovery of loss has a detrimental effect on those which are harmed by alleged negligence The cost of liability is reasonable when compared to total revenues and in light of a CPAs public responsibility Indemnity insurance spreads risk in the aggregate therefore removing the element of risk at the firm level The threat of litigation provides public accountants with a deterrent against negligent work Finally the results of lawsuits cause the profession itself to implement new standards Bolinger p54 The AICPA and its supporters have developed their argument based on continued liabilitys likely effect on the profession as well as an economic argument The arguments in favor of liability reform include the effect of continued liability on the availability of CPA services The likelihood of fee increases resulting from liability risk The threat of the inability
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