Claims Against Negligent Accountants

Professional negligence occurs when a professional, such as an accountant, does not carry out their duties to the required standard which consequently results in a loss.

How do I know my accountant has been negligent?

We understand the complexities of bringing a claim against a negligent accountant. Businesses and individuals rely on accountants in a variety of different matters, from preparing company accounts and carrying out audits to providing tax advice or valuing a company’s assets. Accountants are frequently only instructed in relation to complex matters, and their fees can be high. If the accountant’s work falls below the standard of care expected, then this can result in you incurring a significant loss.

Examples of situations where an accountant has been negligent include:

missing a deadline for filing accounts or annual returns, which may result in you incurring a penalty or a company being struck off Companies House
providing incorrect tax or financial planning advice resulting in the over payment of tax or the loss of investment
negligently valuing a company’s assets
carrying out a negligent audit of a company
failing to prepare important accounting documents
failing to follow instructions
failing to detect fraud

How to establish accountant negligence

A professional negligence claim against an accountant can be pursued as a contractual claim, a tortious claim,or a statutory claim.

Most commonly, a professional negligence claim results out of a breach of a professional’s contractual and/or tortious duties.

Contractual claim:

In order to be successful in proving an accountant has breached their contractual duties to you, you would need to be able to show that you had entered into a contractual arrangement with that accountant and that they have breached the terms of the contract.

Regardless of whether the accountant has contractual duties to you, they may well have also had tortious duties. By that we mean that the accountant may have had a duty of care to you and may have breached that duty.

To succeed in an action for negligence against an accountant, you need to establish that:

The accountant owed a duty to you (contractual and/or tortious).
The accountant breached the duty owed to you.
The accountant’s breach of duty caused you to suffer loss.

What are the time limits on making an accountant negligence claim

Typically, you can bring a negligence claim against an accountant within:

six years from the time of breach of the contract; or
six years from the time you suffer damage as a result of the accountant’s negligence

In tortious claims, it is also possible to pursue a claim within three years from your date of knowledge, i.e. the date when you started to suspect that the accountant might have done something wrong.

There are some exceptions to the general rule.

What are some examples of accountant negligence

University of Keele v Price Waterhouse

The Defendant (an accountancy firm) had negligently advised the University in relation to a profit-related pay scheme resulting in loss of savings which the University would have made otherwise, had the advice been correct.

The Defendant accepted that its interpretation of law was incorrect and, despite the Defendant disputing their liability on the basis of the wording of the exemption clause in the terms of engagement, the court ruled in the University’s favour and awarded compensation in respect of the lost savings.

Key contact

Richard Locke

Partner

Richard is a Partner and an elected partner on the firm’s board of management. He is also Group Head of the ever expanding dispute resolution team at Hugh James. He conducts major commercial disputes frequently with an international flavour including commercial claims, mining disputes, shareholder and partnership disputes, professional negligence claims, contentious IT disputes, injunctive relief and insolvency.