Los Angeles (June 12, 2002) -- Accounting firms are more likely to be held legally accountable for fraud and other misdeeds committed by their clients as a result of the Arthur Andersen-Enron scandal, according to a panel of malpractice insurance specialists speaking at the California Society of CPAs' Accounting and Business Conference.
"Enron has heightened public perception that accountants should be held responsible for fraud committed by their audit and accounting clients," Steven J. Insel, a partner in corporate and securities law at the Los Angeles law firm of Jeffer, Mangels, Butler & Marmaro, told a training session audience of about 200 practitioners.
Ric Rosario, vice president of risk management services for professional liability insurer Camico, said the likelihood of being sued for clients' actions makes it imperative for CPAs to carefully screen prospective clients. One of the morals of the Enron case, he noted, is, "If you lie down with dogs, you will get fleas."
Rosario added that a study of malpractice litigation judgments against Camico's CPA clients found that that CPAs "are held to high standards" and they are expected to uncover fraud. Camico, based in Redwood City, Calif., specializes in providing malpractice insurance and risk management services for accounting firms.
-- Roger Russell
