Accounting can be a risk in and of itself. Financial advice and direction can lead to either gains or losses, though it hopefully always leads to gains. However, there are definitely cases where an error, miscommunication, lack of communication, negligence or something similar leads to a client experiencing a loss and generally negative experience. Often times, this will lead to a lawsuit in order to regain any of the funds lost to the poor actions or mistakes. This type of liability in accounting can be financially devastating, as legal fees can add up to a considerable amount.
What Types of Claims Are You at Risk of?
Errors and omissions (E&O) are a common type of liability that insurances will cover for. These liabilities often lead to claims against accountants saying that the professional services were done improperly. This could be due to poor explanations, negligent behavior, a breach of duty or contract, wrongful or reckless advice and a number of other actions of general wrongdoing leading to poor business results. Liability in accounting can be a huge risk due to small mistakes or false accusations. Professional insurance should be included in your accountant policy portfolio, as the legal fees involved in these claims can be covered by the insurance, including payments for the attorney, damages and settlement, if needed.