PROFESSIONAL LIABILITY SUITS AGAINST TAX ACCOUNTANTS: SOME EMPIRICAL EVIDENCE REGARDING CASE MERIT

Abstract

As with most professional service occupations, liability claims are a major concern for accounting professionals. Most of the academic research on accountants’ professional liability has focused on audit services. This study extends research on accountants’ professional liability by examining liability claims arising from the provision of tax services. In addition to a descriptive analysis, the current study explores the role of merit in tax malpractice litigation. Hypotheses are developed based on the legal construct of claim merit, which requires the presence of accountant error and damages as a result of that error for a claim to be considered meritorious. The hypotheses are tested using logistic and OLS regression of 89 actual claims filed with an insurer of tax professionals. The results suggest that the components of merit are significant in determining both the presence of compensatory payments to the client and the dollar amount of those payments, although the hypothesized interaction effect is only significant for the dollar amount of compensatory payments.

Citation

Bobek, D.D., Hatfield, R.C. and Kramer, S.S. (2004), "PROFESSIONAL LIABILITY SUITS AGAINST TAX ACCOUNTANTS: SOME EMPIRICAL EVIDENCE REGARDING CASE MERIT", Advances in Taxation (Advances in Taxation, Vol. 16), Emerald Group Publishing Limited, Leeds, pp. 3-23. https://doi.org/10.1016/S1058-7497(04)16001-8