In a previous post titled “Why Accountants Need Errors and Omissions”, we discussed the importance of carrying E&O Insurance to protect accountants’ operations from possible liability or malpractice claims. Accountants may face issues with data entry, incorrect tax advice, failure to meet deadlines, or for a number of other factors. While the only foolproof way for your accounting clients to truly protect themselves from a damaging malpractice claim is to purchase the right type of insurance policy, there are risk management steps they can take if they know the common reasons for malpractice claims. We've listed a few here.
Embezzlement within their client’s office. Nearly all malpractice claims against accounts that are over $100,000 are due to fraud on the part of their client. Unethical behavior by a client is one of the main reasons for disengagement. Experts say that it’s often safer to take a stand against client than it is to defend a lawsuit against a third party who will assume the accountant went along with the bad behavior.
Client expectations are different than the work performed. This type of suit could potentially be avoided if your accounting client outlines not only what they will do, but highlight what they won’t do. According to Michelle Duffett, an expert in professional liability programs for accountants, many claims are the result of the gap between the client expectations and what the accountant was actually paid to do.
Lack of disclaimers in prepared financial statements. Often, an accountant is preparing financial statements that are also needed for obtaining credit or some other type of contractual benefit for their client. The accountant must clearly delineate any limitations in the scope of the work in the financial report.
These are just a few of the most common reasons for malpractice claims against accountants, but perhaps the most important for your clients to keep in mind. An Errors & Omissions (E&O) policy from PLRisk Advisors provides your clients with malpractice coverage that contributes towards legal defense costs, damage awards and settlements. What’s more, our programs can be customized specifically for accounting professionals. We understand the unique risks that accounts, CPAs and auditors face and can help you provide your clients with an insurance program that is specially designed to meet their needs.
Contact PLRisk today to learn more about our Accountants Errors and Omissions package. (855) 403-5982.