Vicarious Corporate Liability
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- Date Submitted: 02/18/2012 01:34 PM
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| Archie Bransford |
| Archie Bransford
2-9-12
|
[If it Ain't Broke Don't Fix It!] |
AN ARGUMENT IN SUPPORT OF THE THEORY OF VICARIOUS LIABILITY TO DETER ACCOUNTING FRAUD |
The Bugatti Veyron is the fastest production car in the world, reaching top speeds of 250 miles per hour and accelerating from a halt to 60 miles per hour in 2.6 seconds. Now, can you possibly imagine investing all of that money in that car, driving it home, and proceeding to completely gut the engine because you believe it can go faster? Vicarious corporate liability is analogous to the Bugatti Veyron for the sake of this paper. While vicarious corporate liability may not be the perfect way to deter accounting fraud, its opponents propose taking an axe to it when only a scalpel is needed at most. This paper will discuss the strengths and methods of vicarious corporate liability, and point out the weakness in arguments that use vicarious corporate liability as its antithesis.
Between accounting firms, insurance companies, attorneys, shareholders, and victims involved with cases of accounting fraud, one thing can be said when dealing with vicarious corporate liability: everyone gets what they want. Let’s start with the victims of accounting fraud. Accountants should not be the epicenter for the frustrations of an accounting fraud victim; the focus should be on the perpetrator, because an accountant’s job is to reasonably assure detection of material misstatements which may arise from fraud. Victims should understand that fraud is hard to detect because perpetrators of it go above and beyond the call of duty to conceal it. Victims go after accounting firms because of the “deep pocket theory,” which means the person with the most money who may be at some fault will end up taking the most financial responsibility for it; that is wrong on its face, but the victims manage to squeeze blood from a turnip because the perpetrator, more than likely, would not have been able to...
| Archie Bransford
2-9-12
|
[If it Ain't Broke Don't Fix It!] |
AN ARGUMENT IN SUPPORT OF THE THEORY OF VICARIOUS LIABILITY TO DETER ACCOUNTING FRAUD |
The Bugatti Veyron is the fastest production car in the world, reaching top speeds of 250 miles per hour and accelerating from a halt to 60 miles per hour in 2.6 seconds. Now, can you possibly imagine investing all of that money in that car, driving it home, and proceeding to completely gut the engine because you believe it can go faster? Vicarious corporate liability is analogous to the Bugatti Veyron for the sake of this paper. While vicarious corporate liability may not be the perfect way to deter accounting fraud, its opponents propose taking an axe to it when only a scalpel is needed at most. This paper will discuss the strengths and methods of vicarious corporate liability, and point out the weakness in arguments that use vicarious corporate liability as its antithesis.
Between accounting firms, insurance companies, attorneys, shareholders, and victims involved with cases of accounting fraud, one thing can be said when dealing with vicarious corporate liability: everyone gets what they want. Let’s start with the victims of accounting fraud. Accountants should not be the epicenter for the frustrations of an accounting fraud victim; the focus should be on the perpetrator, because an accountant’s job is to reasonably assure detection of material misstatements which may arise from fraud. Victims should understand that fraud is hard to detect because perpetrators of it go above and beyond the call of duty to conceal it. Victims go after accounting firms because of the “deep pocket theory,” which means the person with the most money who may be at some fault will end up taking the most financial responsibility for it; that is wrong on its face, but the victims manage to squeeze blood from a turnip because the perpetrator, more than likely, would not have been able to...