Accountants face claims from clients and, in defined circumstances, from third parties who relied on their work.

Audit engagements. An audit provides reasonable assurance that financial statements are free of material misstatement. It is not a guarantee and is not designed to detect all fraud, and the distinction between an audit and a fraud examination is the recurring defense.

Third-party liability. Jurisdictions divide among a near-privity approach, a restatement approach limited to a known and intended class of users, and a broader foreseeability approach. Identifying which applies determines whether a lender or investor has a claim at all.

Reliance letters identifying permitted users are what create or foreclose these claims.

Tax advice. Claims for penalties and interest arising from erroneous positions, with the tax itself usually not recoverable since it was always owed. Reliance on advice may abate penalties, which is a benefit the client received.

Non-audit services. Bookkeeping, compilations and reviews carry lower assurance and correspondingly narrower duties, provided the engagement letter is clear.

Engagement letters defining scope, limitations, reliance and, where enforceable, limitations of liability and dispute resolution.

Client fault. Management’s responsibility for the financial statements and for the representations made to the auditor.