Introduction Accountants have a responsibility to clients, third parties, and to the government. To the clients, accountants have an ethical responsibility to: protect them, provide accurate financial information, represent them with enthusiasm and maintain high ethical standards. Accountants’ responsibilities to third parties consist of the accountant’s duty of care, possessing the necessary skills and acting the good faith. An accountant’s responsibility to the government is to provide accurate information to the public and to the government, they also have the responsibility to follow and obey the laws, regulations, and securities acts. The responsibilities of accountants is tremendous, “The standard of care applicable to the conduct of audits by public accountants is the same as that applied to doctors, lawyers, architects, engineers, and others furnishing skilled services for compensation, and that standard requires reasonable care and competence therein.” (www.USLEAGAL.com).

Accountants’ Responsibility to Clients Accountants have certain responsibilities to their clients, some ethical responsibilities are: * Protect our clients. * Produce financial statements and tax returns to the best of our ability after performing a proper due diligence. * Avidly represent our clients with zeal, in the event of audit or other administrative settings, before the Internal Revenue Service, The Illinois Department of Revenue, or other governmental agencies and maintain our independence.

* Maintain the highest ethical standards.
(Chris Amundson.)

Accountants’ Responsibility to Third Parties Accountants have a responsibility to third parties who rely on the financial information prepared by the accountant. Third parties are not accountant’s client, but these third parties also rely on accountants’ financial statements, reports, disclosures, and other financial information. An accountant’s responsibility to third parties is governed by common law, government regulations, and the Securities Acts. “The ultimate responsibility of internal auditors is to develop statements that present the financial situation of the company in a fair way, meaning as much disclosure as necessary to give a reasonable picture of the financial situation to any user having claim to that knowledge. The function of the external auditor is to affirm that has happened by issuing an opinion as to whether the financial statement fairly presents the financial position of the corporation.” (Duska, R.)
According to www.accountants.uslegal.com:
An accountant is liable for damages to his or her client for fraud and negligence, but s/he is liable to third parties, who the accountant knew or should have known were relying on audit, only for fraudulent conduct, and proof of mere negligence is not sufficient. In Marcus Bros Textiles, Inc v. Price Waterhouse, L.L.P., the Supreme Court of North Carolina held that in order for an auditor to be held liable to a third party, that party must demonstrate: (1) the accountant either (a) knew that the third party would rely on his or her information, or (b) knew that the client for whom the audit report was prepared intended to supply the information to a third party who would rely on that information; and (2) the third party justifiably relied upon the information in its decision concerning the transaction involved or one substantially similar to it.

Accountants’ Responsibility to the Government An accountant has the responsibility to the government to follow all laws, regulations, and acts. This includes obeying all standards and principles of accounting. When laws are broken the government steps in and reprimands those who have violated the laws, the same goes with accountants. Accountants have been under the close eye of the government ever since large corporations and the big accounting firms were discovered of fraudulent acts. Accountants must approach clients’ financial information with professionally skepticism, for the well being of themselves. The government implements principles, standards, acts, and even laws and it is our responsibility as accountants to abide by these regulations, and uphold the reputation of the profession.

Action or Claim Related to Clients In the case of Oregon Steel Mills, Inc. v. Coopers & Lybrand, LLP: Oregon Steel Mills, Inc hired Coopers & Lybrand, LLP as the company’s accountant. In 1994, the company sold stock in one of its subsidiaries, Coopers & Lybrand advised them to report $12.3 million as a gain on their financial statements. When they audited the company they issued an unqualified opinion, stating everything matched and was in accordance with GAAP. In late 1995, Oregon Steel Mills filed with the SEC to make a public offering of its stock and debt.

According to the facts of the case of Oregon Steel Mills, Inc. v. Coopers & Lybrand, LLP:
Shortly before the initial SEC filing, defendant advised plaintiff that the 1994 transaction might have been reported incorrectly and that defendant would not approve the audit of plaintiff's 1995 financial statements or allow use of the 1994 audit unless the SEC approved the accounting treatment of the 1994 transaction. Subsequently, the SEC concluded that the accounting treatment for the 1994 transaction was incorrect and required plaintiff to restate its 1994 financial statements. Because of the time required to restate the 1994 financial statements and change other documents related to the planned offering, plaintiff was unable to make its initial filing with the SEC until April 8, 1996, and the public offering did not occur until June 13, 1996. On that date, plaintiff sold $80 million of newly issued stock and $235 million of debt. Although the price of plaintiff's stock was $13.50 on February 22, 1996, when defendant discovered the accounting error, and, coincidentally, also was $13.50 when plaintiff issued the stock on June 13, 1996, the stock price had risen and fallen between those dates. On May 2, 1996, the date that plaintiff alleges that it would have issued the stock but for defendant's negligence, plaintiff's stock sold for $16 per share. (Balmer, J)
“Oregon filed suit against Coopers, seeking as damages the difference between what Oregon actually received for its stock and what it would have received if the offering had occurred on May 2-an amount equal to approximately $35 million.” (Beatty, J.F. & Samuelson, S.S. 2009. P. 379.) The court’s decision concluded that Coopers & Lybrand did breach its duty to Oregon Steel Mills by “failing to provide competent accounting services”, but Coopers & Lybrand did not have a duty to protect Oregon Steels Mills “against market fluctuation in plaintiff’s stock price.” “For the reasons discussed above, we conclude that, although defendant breached its duty to plaintiff by failing to provide competent accounting services, defendant had no duty to protect plaintiff against market fluctuations in plaintiff's stock price.” “The decline in plaintiff's stock price in June 1996 was, as a matter of law, not reasonably foreseeable, and defendant cannot be liable for damages based on that decline. The trial court correctly granted defendant's motion for summary judgment on that ground.” ( Balmer, J)

Action/Claim Related to Third Parties
A case related to third parties is Ellis v. Grant Thornton; in this case First National Bank of Keystone issued many uncertain mortgage loans for five years, which the borrowers of those loans defaulted. Keystone lied about the value of the loans, so the Office of the Comptroller of the Currency (OCC) required them to hire accounting firm Grant Thornton. “Stan Quay was the lead partner on the account. On a theory of what can go wrong will go wrong, he was negligent in conducting the audit and failed to notice a discrepancy of $515 million between the reported and actual value of the loans.” (Beatty, J.F. & Samuelson, S.S. 2009. P. 381.)

Gary Ellis joined Keystone management after Quay reassured him of issuing a clean, unqualified opinion.
On April 19, 1999, even though Keystone was, in fact, insolvent as of the end of 1998, Grant Thornton issued and delivered to Keystone's board its audit opinion stating that Keystone's financial statements were fairly stated in accordance with the GAAP and reflecting a shareholder's equity of $184 million. The intent of the report was plainly stated on the first page of the report: “This report is intended for the information and use of the Board of Directors and Management of The First National Bank of Keystone and its regulatory agencies and should not be used by third parties for any other purpose.”
The audited financial statements provided by Quay to the board on April 19, 1999 were substantially the same as the financial statements Quay had provided board members and shareholders in March 1999. Based on Grant Thornton's audit report, Keystone's board continued to declare dividends and operate the bank. (Ellis v. Grant Thornton.) Keystone was insolvent and closed its doors, Ellis was now out of work, he filed suit against Grant Thornton for lost wages. The court’s decision concluded that Grant Thornton was not liable because the accounting firm “prepared its audit for the benefit of Keystone and the OCC.” (Beatty, J.F. & Samuelson, S.S. 2009.)
It did not know that Ellis or any other potential employee would be relying on the report. Keystone did not pay Grant Thornton to review the bank’s financial position with potential employees and, indeed, the accountants did not know about Ellis’ involvement until after it had decided to issue the clean opinion. Grant Thornton was not aware that it might be held liable for Ellis’ lost wages. If the accountant is unaware of the risk, he cannot be held liable. (Beatty, J.F. & Samuelson, S.S. 2009.)

Action or Claim Related to the Government
Robert W. Armstrong, former controller of National Medical Care, Inc., allocated:
A portion of NMC’s income to excess reserves in 1991 to 1992 and using the reserves to inflate falsely and materially Grace’s stated income in 1993, 1994, and the first quarter of 1995 constituted a fraudulent scheme. The purpose for the scheme was to create publicly-filed financial statements that deceived analysts and investors by portraying the Health Care Group’s rate of income growth as steadier than in reality, and as consistent with analyst expectations.
(www.sec.gov)
This is a case of the Securities Acts of 1933 and 1934 being violated; thereafter the Securities and Exchange Commission (SEC) brought forth charges against Robert Armstrong. In addition to these charges, Armstrong was accused of several more wrong doings, violating codes, ethics, principles, standards, and even fraudulent behavior.

Accounting-Client Privilege Accountant-client privilege prohibits “the disclosure of confidential information shared by a client with his or her accountant.” (Rosenthal. 2010.). The purpose of this privilege “is to create an atmosphere in which the client is able to provide all relevant information to an accountant without fear that the information will be disclosed subsequently.” (Rosenthal. 2010.)

Should the Accounting-Client Privilege Be Expanded? According to Francine Lipman, “the accountant-client privilege is far narrower then the attorney-client privilege, which generally protects communications between a client and attorney in all proceedings and for all times, unless the client waives protection.” The new provision to the accountant-client privilege, “does not address whether the confidentiality privilege extends to an accountant’s work product, which generally would be protected from disclosure if prepared by an attorney.” (Marisero. 1999.) Since the statue does not address this issue, it is let open for judicial interpretation.
According to Sylvan Siegler:
The privilege is limited to “tax advice”. The preparation of a tax return may not qualify as “tax advice.” Without knowing precisely what the privilege applies to, the privilege may by inadvertently waived by the client or the accountant. Moreover, the new federal account-client privilege applies only to federally authorized tax practitioners-CPAs, enrolled agents, enrolled actuaries, and attorneys who provide accounting services.
(Sylvan Siegler. 2000.)

If the Accounting-Client Privilege were to be expanded, how would that affect the Accountant’s Whistle-blowing Responsibilities?
If the Accountant-Client Privilege were to be expanded, I believe this would give accountant’s more freedom and would eventually lead to more lawsuits and liability issues.
“By virtue of their attest function, accountants/auditors belong to the class of gatekeeper intermediaries in the financial markets who have a “watchdog” responsibility.” (Duska, R.) Nevertheless, even if this did happen, I believe it needs to be done to catch crooked accountants and money-hungry corporations. At this point auditors serve as policeman, and are authorized to turn over any wrongdoings they find. According to the Accounting Reform Efforts:
Legislation sought to force accountants into the role of policemen, no matter how ill-equipped they might be for such a role. The Private Securities Litigation Reform Act of 1995 set forth audit requirements for accountants certifying the statements of public corporations. Those auditors were required by that statue to comply with GAAP and GAAS standards. This legislation additionally required auditors to investigate any possibly illegal acts they might encounter during an audit and to inform management. Under this legislation, if management did not act, and the matter was material, the auditor was required to report the issue to the board of directors. The board must then inform the SEC of the issue. If the board did not act, the auditor was required to inform the SEC or resign the engagement. The resignation would also have to be reported to the SEC, as well as the reasons for resignation. This legislation made the accountant a professional informant, which was then a unique role for professionals. (Accounting Reform Efforts. 2006.)

What or Who Should Take Priority? In my opinion, an accountant does not have a priority to one particular individual or group such as: clients, the government, shareholders, the community, and other public entities. I believe an accountant should have high ethical standards, when they apply their ethics and morals all individuals and groups take priority. Patricia Barker say sit best by stating:
It seems to me that if we are to restore our reputation and continue to hold ourselves out as a professional body, we simply must re-focus ourselves on the ethical component of our profession. We aspire to the highest technical levels and we also aspire to high ethical levels. Because of the enormous increase in technical regulation-much of it resulting from poor ethical behavior – we have allowed ourselves to see our practice through a regulation integrity lens rather than through an ethical integrity lens. (Patricia Barker. 2011.)
Where does Priority Lie beyond the Rules and Regulations? I believe an accountant should look out for themselves first and foremost, by doing this everyone is protected and is taken as a priority.
I agree with Barker when she stated:
The emphasis should not be on providing a list of written rules that can be invoked when someone defaults. The emphasis should be proactive rather than reactive and should result in an almost inbred spirit of ethical thinking as a given before anyone is admitted to the profession. It should give young trainees an understanding of their own ethical values and knowledge of the principles and values embedded in the profession. (Patricia Barker. 2011.)

Example: I believe a good example of a case that affected clients, third parties, and the government is the Bernie Madoff case. Bernie Madoff’s fraudulent actions were towards clients, investors, and broke several government regulations and laws.
According to Kenneth Rosenthal:
Many of the investors in the Madoff scheme brought suit, not against the bankrupt Madoff entities or the clearly culpable three-man accounting firm that audited Madoff, but the deep-pocketed auditors of the feeder funds that placed clients with Madoff. (Rosenthal, K. 2011.)

References
Accounting Reform Efforts. (2006). In A Financial History of Modern U.S. Corporate Scandals from Enron to Reform. Received on December 20, 2011 from http://lib.kaplan.edu/login?url=/login?qurl=http://www.credoreference.com/entry/sharpecs/accounting _reform_efforts
Amundson, C. Ethical Responsibilities of CPAs and Tax Accountants to the Client. Retrieved on January 4, 2012 from http://www.accountingsolutionsltd.com/accounting_articles/cpa_tax_accountant_ethical_responsibilities/
Balmer, J. OREGON STEEL MILLS INC v. COOPERS LYBRAND LLP. Retrieved on January 8, 2012 from http://caselaw.findlaw.com/or-supreme-court/1417409.html
Barker, P. ( 2011). The Economic Collapse and the Reputation of Chartered Accountants. Received on December 20, 2011 from http://web.ebscohost.com.lib.kaplan.edu/ehost/pdfviewer/pdfviewer?sid=4c50b66f-a47b-4a32-9afc-28b2b774386e%40sessionmgr12&vid=2&hid=10
Beatty, J. F. & Samuelson, S.S. (2009). Introduction to Business Law. 3rd Edition.
Duska, R.F. (2005). The Responsibilities of Accountants. Retrieved on December 26, 2011 from http://ideas.repec.org/a/pal/gpprii/v30y2005i3p410-424.html
Duties and Liabilities of Accountants. Retrieved on December 26, 2011 from http://accountants.uslegal.com/duties-and-liabilities-of-accountants/
Ellis v. Grant Thornton. Retrieved on January 8, 2012 from http://caselaw.findlaw.com/us-4th-circuit/1345564.html
Liability to Third Party. Retrieved on January 4, 2012 from http://accountants.uslegal.com/duties-and-liabilities-of-accountants/liability-to-third-party/
Lipman, F. J. (1999). Accountant-Client Privilege Narrowly Defined by Congress. Orange County Business Journal, 22(3), 45. Retrieved on December 26, 2011 from http://web.ebscohost.com.lib.kaplan.edu/ehost/detail?sid=dbb4cd7f-5f6e-4c30-ad56-bba3b6c345cc%40sessionmgr10&vid=1&hid=18&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bwh&AN=1495421
Manisero, T.R. (1999). Accountant-Client Privilege: Opportunities and Limitations. Retrieved on January 3, 2012 from http://www.nysscpa.org/trustedprof/0299/article20.html
Rosenthal, K. (2011). Defending Accounting Malpractice Claims. The CPA Journal. Received on December 20, 2011 from http://web.ebscohost.com.lib.kaplan.edu/ehost/pdfviewer/pdfviewer?sid=6d71d40c-7350-4925-91a0-c67a01c65cbc%40sessionmgr4&vid=2&hid=10
Robert W. Armstrong. Securities and Exchange Commission. Retrieved on January 3, 2012 from www. sec.gov
Siegler, S. (2000). The Privilege and Perils of Public Accounting. National Public Accountant, 45(10), 8. Retrieved on December 26, 2011 from http://web.ebscohost.com.lib.kaplan.edu/ehost/detail?sid=21d0ccec-fdd7-4184-9ec7-f80adf3c701b%40sessionmgr15&vid=1&hid=18&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=f5h&AN=3998749