Accountants Professional Liability Insurance Offers Adequate Protection
Accountants face potential liability on a daily basis simply because of the nature of their work, which is why so many invest money in coverage, in the form of accountants professional liability insurance. After all, financial institutions depend on them to verify the numbers on loan applications, and investors also rely on their accountants to provide accurate information during audits when they make investment decisions.
Those same accountants are often targeted to take the blame of the failure of a business due to errors and omissions in the work they perform, since they often provide financial advice to companies, prepare their tax returns or audit their financial statements in an attempt to provide a reasonable assurance that they have accurately reflected the financial situation of those same businesses.
The cost of liability coverage is not very excessive
Those are just a few of the reasons why the American Institute of Certified Public Accountants, the national trade organization for CPAs, recommend that every accounting firm carry liability insurance. Liability insurance is significantly less expensive than it would be for say, a physician, but it’s likely to be slightly more costly than for some other medical professionals, such as pharmacists and nurses.
The price of a policy is determined by many variables, including the size of the firm, the type of work the firm does, and the amount of the policy deductible. Companies that audit publicly traded firms generally face greater costs than those that audit private firms, in part because the greatest number of claims come from tax practices, but the most expensive claims most likely result from audit work.
Due to the volume of clients, larger firms tend to be at risk every day, with liability being a present factor, even in the lowest level of services provided. For example, some firms do a lot of compilations, which involves creating financial statements from information provided by the client, but the accountant often does not verify that same information.
Even though a compilation clearly states that the accountant isn’t expressing an opinion about the statements, someone who relies on them for a business transaction can still sue the accountant, citing negligence, or errors or omissions, all the more reason to carry adequate amounts of accountants professional liability insurance.