ACCT 511 Week 6 Interview Assignment Example

Interview Assignment: Legal Issues in the Work of an Accounting Professional

ACCT 511 Advanced Business Law for Accountants, Interview Assignment

Thread by [Student Name]

The interviewee, the company and the classmates are composites standing in for the professional a student would interview; the statutes, publications and scholarship cited are real.

The Interviewee

I interviewed Karen, the controller of a commercial construction company with about $140 million of annual revenue and 300 employees. Karen is a CPA who spent five years in public accounting before joining the company, where she has worked for eighteen years. When I asked how often she deals with legal questions, she laughed and said "every day before lunch." Construction, she explained, runs on contracts, and every contract carries deadlines and risks that land on the accounting department. She does not practice law, but she has learned to recognize when a problem is legal, when it can be handled by the business and when it needs counsel. I prepared for the interview by drafting questions tied to the course's chapters on contracts, the Uniform Commercial Code, agency, employment and insurance, and I asked Karen for a specific example each time she described a general practice. We spoke for about an hour by video, and she reviewed my notes afterward to make sure I had described her examples accurately.

Contracts and Change Orders

Most of the company's revenue comes from fixed-price contracts with owners and general contractors. Karen said the most common source of disputes is the change order, a modification to scope or price after the contract is signed. Her rule is that no extra work is billed until a written change order is signed, because a verbal approval from a site superintendent may not bind the owner. She described a project on which the company performed $230,000 of extra excavation on the strength of a phone call and spent a year negotiating payment. The owner's project manager had approved the work, but the contract required written change orders signed by the owner's representative, and the owner argued it never agreed to the price. The company eventually recovered most of the amount, but only after legal fees and a strained relationship. This matches the course's discussion of contract modification and authority: an agent can bind a principal only within actual or apparent authority, and a written-modification clause in the contract may make oral changes unenforceable. When the company buys materials, Karen added, the purchase orders and the suppliers' acknowledgments often contain conflicting terms, and she pointed me to the battle of the forms rule in Section 2-207 of the Uniform Commercial Code, under which a contract can form even when the forms differ, with additional terms treated as proposals between merchants unless they materially alter the deal (Uniform Commercial Code § 2-207, 1977).

Lien Deadlines

The second topic was mechanic's liens. If an owner or general contractor does not pay, the company's protection is a lien on the property, but only if notices and filings are made within strict statutory deadlines, which vary by state. Karen keeps a calendar of notice and filing deadlines for every active project and reviews it weekly with the project managers. "A lien right you miss by one day is gone," she said. She explained that preliminary notices often must be sent within a short period after the company first supplies labor or materials, and that the final lien filing must follow within a set time after the work is completed. Because each state's statute is different and the company works in four states, she keeps a summary of the rules prepared by counsel and updates it whenever a statute changes. For a construction controller, a missed deadline is not a late form; it can be the loss of the only security the company has.

Employees or Contractors

Karen's third topic was worker classification. The company uses many subcontractors, and the line between an independent subcontractor and an employee affects payroll taxes, workers' compensation and wage and hour obligations. She relies on the common-law control test the IRS describes, which looks at behavioral control, financial control and the relationship of the parties (Internal Revenue Service, 2025). When a crew works only for the company, uses its equipment and follows its schedule, she treats the workers as employees even if they call themselves contractors. She described an audit by the state workforce agency that reclassified a framing crew the company had treated as subcontractors, producing back unemployment taxes and penalties. Since then, the company requires every subcontractor to provide a business license, its own insurance and evidence that it works for other customers, and she documents the classification decision in a file for each one.

Certificates of Insurance

The last topic was insurance. Before any subcontractor starts work, Karen's department collects a certificate of insurance naming the company as an additional insured. She explained that if an uninsured subcontractor's worker is injured, the company's own policy may have to respond and its premiums will rise. Her department audits certificates quarterly, because policies lapse and coverage limits change. She also reviews indemnification clauses in subcontracts, which shift responsibility for certain losses to the subcontractor, and noted that those clauses are only as good as the subcontractor's insurance and finances. When a subcontractor's coverage is canceled midway through a project, her department stops payment until a new certificate arrives, a step the subcontract allows.

What I Learned

Karen learned most of this law through experience, sometimes painful, and through the company's outside counsel, whom she calls whenever money or deadlines are at stake. Three lessons stand out for me. First, a CPA in industry needs enough legal knowledge to see problems early, even though the solution may belong to a lawyer. Second, documentation, signed change orders, lien calendars, classification files and certificates, is the accountant's main legal tool. Third, the accounting department is often the last line of defense, because it is where contracts become invoices and payments. The interview made the course's legal chapters concrete for me in a way the reading alone did not. I was also struck by how much of her legal work is preventive. She rarely goes to court; instead, she designs routines, calendars, checklists and approval rules, that keep the company out of disputes. That is a skill accountants already have, applied to legal risk. Finally, Karen's comment that she calls counsel whenever money or deadlines are at stake reminded me that a good accountant knows the limits of his or her own expertise. My plan is to keep a running note of each legal issue I encounter and whom I would consult about it.

Reply to Cameron

Cameron, your interview with a tax manager who represents clients in IRS examinations raised a legal point I had not considered: the limits of the confidentiality a CPA can offer. Your interviewee said clients sometimes assume their conversations with a CPA are privileged in the same way as conversations with a lawyer. The Internal Revenue Code does extend a limited privilege to federally authorized tax practitioners for tax advice in noncriminal matters before the IRS, but it does not apply in criminal cases or to written communications promoting tax shelters (Internal Revenue Code, 1998). That is a narrower protection than many clients expect, and your interviewee's practice of explaining it at the start of an engagement seems wise. Putting the explanation in the engagement letter would also create a record that the client was told. It also connects to Karen's point in my essay about knowing when to call counsel. A tax manager who sees signs that a matter could become criminal should recommend that the client retain a lawyer, who can then engage the CPA under the attorney's privilege. I appreciated how your essay showed the practical side of a topic the textbook treats in only a paragraph. It also made me wonder whether Karen's company should review what its own tax advisers are told.

Reply to Hannah

Hannah, your interview with an internal auditor at a hospital system described a moment when she found billing irregularities and had to decide whether to report them outside the organization. Her experience connects closely to next week's forum on securities regulation and whistleblowing. She explained that she reported internally first, to the audit committee, and that the organization corrected the problem. Her decision to document each step before reporting also protected her later. Research suggests that her role is more important than many people assume. Dyck et al. (2010) studied fraud cases at large U.S. companies and found that detection often came from employees, the media and industry regulators rather than from investors, the SEC or auditors, and that financial rewards helped account for when employees chose to speak. Your interviewee's account also showed the personal cost of speaking up, since she described months of tension with the billing department. I thought your essay's conclusion, that internal auditors need both courage and clear reporting channels, was well supported by her story, and I would add that federal whistleblower protections give employees in her position some legal security if internal reporting fails. Knowing those protections exist may make it easier for the next internal auditor to report what she finds.

References

Dyck, A., Morse, A., & Zingales, L. (2010). Who blows the whistle on corporate fraud? The Journal of Finance, 65(6), 2213-2253. https://doi.org/10.1111/j.1540-6261.2010.01614.x

Internal Revenue Code § 7525 (1998).

Internal Revenue Service. (2025). Employer's supplemental tax guide (Publication 15-A). U.S. Department of the Treasury. https://www.irs.gov/pub/irs-pdf/p15a.pdf

Uniform Commercial Code § 2-207 (1977).