What Liability Risks Do CPAs Face?

Accountants may face a variety of professional liability issues. Some areas of concern could include mergers, engagement documentation, wealth transfer, fraud and data protection. An accountant professional liability policy should cover many of these risks. As a CPA, you may want to be aware of these risks and make sure your insurance plan provides adequate protection.

When two CPA firms merge, it is usually one of the highest exposure events they will face. It usually important to do your due diligence when investigating a firm you are interested in acquiring. Look at their claim history and peer review history. You may want to make sure you are not buying any potential legal issues.

Engagement documentation is usually a CPA firm’s first line of defense against professional liability claims. It should outline the scope of the services to be provided. It should also be signed by the client and be updated each year.

When a CPA is called to act as a trustee, financial advisor or executor for a client, potential liability issues may arise. There is a fairly low evidentiary threshold when it comes to an accountant’s duty to a client. If an individual can show that you had a fiduciary duty and that duty was breached, you may be facing a significant lawsuit.

Fraud and data protection may be the result of rogue employees, but your firm may still be held responsible. Accountant professional liability insurance could help protect you against claims.

Your CPA firms should make sure they have an appropriate level of insurance to cover any claims that may be brought against them.