Professional accountants provide business owners with information on the legal and tax issues relating to accounting information. Legal issues arise when business owners provide inaccurate or fraudulent accounting information to lenders, investors, and the general public. Business owners are usually liable for not reporting their company’s financial information accurately.
Incorrect accounting information can increase a company’s tax liability. Overstating income, inventory value, or other items can significantly increase the amount of taxes owed by the company. Small businesses organized as a sole proprietorship also need accurate accounting information since income will be reported on the business owner’s personal income tax return. Inaccurate accounting information can trigger a personal and business tax return audit.