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Is Your CPA Firm Liable If Embezzlement Occurs?

Recent Ohio case addresses this issue.

Thoma v. Barnes, Dennig & Company, 784 N.E.2d 1207 (Ohio 2003)

Background. Can an employer sue its accountants for failing to discover that a bookkeeper was embezzling large sums of money over a 6-year period? This is the question addressed by an Ohio court in a recent case. While the case involved a for-profit business, the court's conclusions are equally relevant to churches and other nonprofit organizations.

For twelve years a company used a local CPA firm to perform yearly "reviews." In a review, the CPAs review the client's financial documents (including bank statements), speak with the client's employees, and create financial statements for the client. During a review, a CPA firm would also perform "analytical tests" on account balances to verify that those figures were calculated using generally accepted accounting principles. A review is more thorough ...

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Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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  • March 1, 2004

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