Accounting

Legal Issues for Accountants and Auditors Advising Business Entities (Portfolio 5512)

  • This Portfolio discusses and analyzes legal issues from the standpoint and background of accountants and auditors, outlining the basic legal concepts that impact accounting and the services accountants provide.

Description

Businesses and other organizations of every stripe face a variety of accounting issues, many of which are influenced by various aspects of the law. Choosing an entity type, complying with payroll and benefit regulations, making investment and financing decisions, engaging in operating transactions, changing ownership, and dissolving an entity all raise both legal and accounting issues that cannot be addressed in a vacuum. Accountants and auditors conversant with significant legal issues can better advise business entities both independently and collaboratively with legal counsel. Furthermore, lawyers advising business entities increasingly are called upon to help resolve issues that involve accounting. Accounting professionals can better assist lawyers by having at least a basic understanding of the context in which business law is practiced.

This Portfolio discusses and analyzes legal issues from the standpoint and background of accountants and auditors, outlining the basic legal concepts that impact accounting and the services accountants provide. The work seeks primarily to provide a basic understanding of the legal context of business and accounting decisions and to foster coordination and cooperation among lawyers, accountants, and auditors who advise business entities, other organizations, and their owners.

The Portfolio begins by describing the basic environment in which the law is created and practiced. Section II of the Portfolio explains where the law originates and the basic building blocks of business law: contract, agency, and property principles. Section III identifies, compares, and contrasts the major types of business entities. The majority of the Portfolio analyzes the three fundamental phases in the life-cycle of a business enterprise: formation, operations, and termination (Sections III, IV, V, VI, VII, VIII, IX and X). Section III identifies the methods of formation and ways in which the status of an enterprise can be ascertained. Section IV focuses on the conduct of business through agents and employees and details the basic employment rules. Section V considers assets in the legal context in order to give the accountant sufficient background to understand how the law may effect accounting for assets. Likewise, Section VI contains a review of legal principles related to liabilities. The final component of the balance sheet (equity) is covered in Section VII, which describes the various forms of equity structure found in business organizations. Section VIII deals with general governance matters, such as management’s fiduciary obligations. Section IX contains a discussion of the various legal mechanisms for dissolving a business. Section X reviews the litigation and dispute resolution process.

Nothing in this Portfolio is intended to provide or substitute for legal advice rendered by competent counsel. Furthermore, although many of the topics discussed raise tax issues, this Portfolio merely discusses those issues tangentially. Other sources, particularly the Bloomberg BNA Tax Management series of portfolios, cover them more thoroughly.

This Portfolio may be cited as Bloomberg BNA Tax and Accounting Portfolio 5512-2nd, Borek, Legal Issues for Accountants and Auditors Advising Business Entities (Accounting Policy and Practice Series).


Table of Contents

I. The Relevant Legal Environment
II. The Fundamental Components of Business Law: Contracts, Agency, and Property
III. Entity Formation and Existence
IV. Operations of a Business Enterprise
V. Assets
VI. Debts and Obligations
VII. Legal Principles Affecting the Accounting for Equity
VIII. Entity Governance
IX. Dissolution, Sale, and Other Forms of Termination
X. The Dispute Resolution Process

borek-charles-2015
Charles Borek
CEO & Chief Counsel
Borek Group LLC
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