Joel Palmer

Practice management is key to minimizing accounting malpractice claims

One of the biggest risks to an accounting firm is an accusation that their mistakes caused a clients’ financial loss.

Errors happen. A few wrong calculations could result in a client being assessed a tax penalty. Errors in financial statements can negatively impact the purchase or sale of a business. A lack of organization often results in lost documents and missed deadlines.

The best way to minimize the risk of financial loss for your firm is having errors and omission insurance, also known as professional liability or accounting malpractice insurance.

Liability insurance helps cover the costs your accounting firm will incur if a client files suit against you. This includes your legal expenses, settlement payments to the client, and other expenses that arise.

The cost for liability insurance for accountants is manageable for most firms. Even so, it pays to conduct your business in a way that minimizes the risk of clients filing claims against you. This can not only save you money on the claims themselves, but having the right practice management protocols in place can also reduce the cost of your liability insurance.

Liability insurance premiums are based on a number of factors, including your firm’s revenue, location, and the amount of coverage purchased. Claims history against your firm will also impact your premium cost.

Another area that affects premium rates, one in which you have some control in improving, is practice management. Proper practice management protocols can mitigate the potential for malpractice claims, which can reduce the cost of your liability insurance.

Many firms have improved practice management by investing in practice management software. This is a tool that helps accounting firms organize their operations, workflows, and client communications. If used correctly, practice management software can minimize the kinds of errors that frequently lead to malpractice lawsuits.

Another way to protect your firm is to do regular risk assessments of your operations. Are you staffed adequately for the volume of business your firm handles? Are client documents handled and stored safely and securely? Do you or the other accountants in your firm have the knowledge and training to address industry-specific accounting issues? Are offices and workspaces organized or are you relying on scattered sticky notes to keep you on task?

If you’re like most accounting professionals, you lack the time to conduct an adequate risk assessment while you’re trying to meet client deadlines.

What if you had help from the same company that provides your liability insurance?

ProDefender’s accountants liability insurance includes free risk management services. These services include guidance on claims, potential claims and situations that could potentially result in a claim.

Our partner experts can address your questions regarding best practices, claim avoidance, engagement and disengagement of services, and general practice questions. Risk management advice is provided by experienced attorneys from law firms specializing in accountant’s professional liability. These attorneys are well-versed in all aspects of the accounting business, from audits, compilations and reviews of financials, to tax matters and other business issues.

Our risk management partners help accountants minimize, if not eliminate, potential claims by clients and non-clients, disciplinary proceedings, and even criminal prosecution.

Insureds who make a written request will receive an engagement letter that spells out the terms of their attorney-client relationship with our partner firm assuring confidentiality.

 

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