Accounting Risks Add Up

Accountants have been busy working against the recent deadline for second-quarter 2012 estimated tax payments. With their own clients looking to tighten their belts and cut back wherever possible, accountants not only need to carefully navigate their clients' financial statements, but they also need to manage their own professional risk.  

Accountants' exposures may include cyber liability, changing tax laws, tax implications of health-care reform and providing client service outside of their traditional accounting practice, such as financial planning. To avoid professional liability, insurance agents and brokers can help accountants by identifying their risks and advising them about best-practice management strategies, including:

• Ongoing Education. Given the frequency of changing tax laws, accounting and audit rules, staying current can be one of the biggest threats to an accountant's practice. This makes ongoing education and regular updates to accounting software and procedures critical as even small errors in the interpretation of accounting rules could result in serious financial loss and potential malpractice claims, exposing accounting professionals both financially and professionally.

• Communicating Precisely and Clearly. Clients look to their accountants for sound strategy and financial advice, and if an accountant misspeaks or doesn't adequately communicate the ramifications of a tax or accounting decision, in the event of an unintended outcome, the fallout can cause client dissatisfaction or even legal action.

• Paying Attention to Details. Careful documentation of all significant decisions made—including the options discussed and the pros and cons of each, the accountant's advice, and the client's decision and instruction—are all critical in the event a claim is filed. If the client's memory of the prior discussions differs from the advice recalled by the accountant, the documentation can be the key in successful loss mitigation. 

Agents can be even more helpful by providing additional potential coverage solutions, beyond practice management, to the risks they have identified among their accounting clients. Producers should partner with a provider that is able to address client needs for each of their key exposures.

Introducing best-practice management techniques can minimize risk but won't completely eliminate it; and some accountants may lack adequate insurance coverage to meet today's exposures. Insurance agents and brokers can also help accountants to understand the nuances of professional-liability coverages that are designed to meet specific insurance needs. 

For example, agents and brokers can help to assess whether an accountant requires coverage such as: network and information-security offense or cyber-liability coverage, crisis event coverage, loss of earnings expense reimbursement, or subpoena-response coverage to protect accountants from some of the newer emerging professional exposures.  

Without the proper professional-liability coverage, accountants open themselves up to financial and reputational damage. By understanding emerging exposures, accountants will be better prepared to address their risks and can reduce their exposure. Having well-tailored insurance products and an agent or broker who can consult and advise on risk-management strategies can help accountants navigate their busy tax seasons and provide long-term financial stability for their professional practices.