Common Risks Accountants Mitigate – Public Liability Insurance
September 26, 2016
Professional Liability Insurance
If you are a practicing professional in any field, you need to know the hazards associated with it. Knowing the risks and taking protection against it is a necessity. The hazards of professionals, from lawyers and accountants to physicians, are somewhat common. Complaints and claims can be of many kinds, but it would fall in the categories of misinterpretation, malpractice or negligence. In the event of claims, professionals have to ensure that they are not financially inconvenienced from it. This is the purpose of taking Professional Liability Insurance. The insurance policy takes care of the financial liability that arises from claims.
Some practicing CPAs might feel that they are operating in low risk areas. Hence, they might feel that they can do without public liability insurance. It is true that Accountants are better off than others, but it would be a mistake to take things for granted. You never know when the unexpected might happen. So, it is better to evaluate the possibilities, and take proper insurance cover. At least, you have the peace of mind of not paying from your pocket should anything go wrong. The possibilities of risks for accountants, as well as, risk management, have been discussed in this post.
Auditing is one of the functions of CPAs when clients have high expectations of their fraud detecting abilities. The purpose of auditing is to plug revenue leakage and identify weakness in the operations of a company. Detection of inconsistencies in accounting procedures and fraud are high on the list of expectations of clients. However, there are occasions when errors and omissions can happen. Theft and fraudulent activities might go undetected which clients can discover later and file claims. Regular risk assessment is essential for practicing CPAs and firms in order to remain covered by insurance.
As a CPA, you are responsible for providing adequate protection to the clients’ data that is shared with you. However, data theft and loss is not uncommon. Even unauthorized access can cause enough damage. It is true that you will arrange for the best data storage services that are adequately encrypted, but is it foolproof? It’s difficult to say yes. Therefore, taking public liability insurance will take care of any eventualities, and you will stay protected.
Documenting the scope of work
The scope of work, defined in the contract of a CPA, is the first weapon that is used to encounter claims. Since the specific roles and responsibilities of the CPA are outlined here, it can be used as a solid defense. There should not be any room for informal contracts, and every detail of work and responsibilities should be defined unambiguously. When nothing works, fall back on Public liability insurance.
Mergers and Acquisitions
Dealing with M&A has increased considerably post recession 2008. In such deals, there are certain financial elements that are either suppressed or misrepresented. The full financial picture is not available. This can lead to claims that have to be encountered with the insurance policy.