Is Your CPA Firm Liable If Embezzlement Occurs?

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 ...