If you are a certified public accountant, you probably owe your clients a duty of care. This means you can potentially be sued for negligently performing your duties as well as for fraud. This is because your opinion usually carries a lot of weight and may affect a client’s judgment. Liability in accounting is often high. Accountants should take the necessary precautions in case any claims of breach of duty are brought against them.
Accountants may even be held liable for their client’s accounting misstatements. This often requires that you be knowledgeable and vigilant. Accounting firms could face many legal liabilities including wealth transfer, engagement documentation, merging with another firm, data protection and fraudulent activity. In our litigious society, claims can happen against even the best, most meticulous practitioners.
Professional liability insurance may be able to help you mitigate some of these risks. There are policies designed to protect accountants specifically. Because CPAs are held to a higher standard, insurance is likely more important to you. You may be held responsible for your clients’ financial losses and gains.
As a CPA, you are usually in a high-risk category. The evidentiary threshold may be especially low if you, as the accountant, have a fiduciary duty to your client. If you don’t have a fiduciary relationship, you usually must exhibit a reasonable professional standard of care. Because liability in accounting is so high, it is important that you consider investing in suitable insurance and talk to a provider that is familiar with your line of business.