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Posted on: September 6, 2018 by Huntersure
Accountants spend their entire days meticulously tending to their clients’ documents and information, yet still face risks of their own when it comes to liability. Their job is to reduce financial risks, but are just as open to legal issues as their clients are. In this case, CPA’s can be proactive when it comes to protecting their careers and integrity with an effective CPA liability insurance program outfitted to meet their needs.
Another way to reduce risk is to be on top of the common claims made against them by clients who use their services. Here are some of the common claims scenarios CPA’s face at any moment:
Probably the most common claim made against a CPA is one of malpractice for negligence and fraud. This claim points to an accountant’s failure to meet the standard of care that was initially agreed upon and not met in the process.
Mistakes happen, especially when it comes to the very dense paperwork and process of submitting tax information. But this is one situation in which small mistakes cannot happen, because when they do they could spell big trouble for CPA’s. Those who use the services of a CPA can sue them because they received less than what they should have actually gotten if the accountant had done everything as perfectly as they were hired to. Error claims are very common, but should not be taken lightly.
Tied to the claim above, someone who sees miscalculated returns on their paperwork can turn around and sue the accountant or the account firm they hired. When this happens, legal litigation comes into play and can completely dash the overall operation and integrity of an accountant or firm.
An accountant who forgets to file a required form runs the risk of legal issues. Even if this isn’t discovered until years later, they are still liable for the error they made. The client can demand that the preparer pay the penalties and interest, and depending on the size of those, this can empty out an accountant’s bottom line.
If an accountant’s client is sued, they may be brought in by being subpoenaed to go over documents and financial history. Having an insurance plan in place to cover the cost of legal issues and representation will make a big difference for the CPA who finds themselves in court.
If an audit is performed and it shows overstated inventory and assets from years prior, this can spell trouble for a CPA. Once again, even if this is not discovered until much later, years down the road, they are still held liable for this mistake. The client can demand that the accountant in question reimburse them for the overpayments.
While there are many more claims that can be brought against a CPA, it’s important to understand at this point just how vital having coverage is. Insurance agents should be ready to express the importance of this and the benefits of having legal protection lined up in case of controversy.
Huntersure LLC is a full-service Managing General Agency that has provided insurance program administration for professional liability products to our partners across the United States since 2007. We specialize in providing insurance solutions for businesses of all sizes. Our program features can cover small firms (grossing $2.5 million annually) to large corporations (grossing $25 million annually or more). We make doing business with us easy with our breadth and depth of knowledge of E&O insurance, our proprietary underwriting system that allows for responsive quoting, binding and policy issuance and tailored products to meet the needs of your insureds. Give us a call at (646) 751-3030 to learn more.
Posted in: Accounting blog Professional Liability