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As Liability Risks Rise, Accountants Should Check their E&O Policies

As Liability Risks Rise, Accountants Should Check their E&O Policies

As Liability Risks Rise, Accountants Should Check their E&O Policies

A recent article in on-line publication, Accounting Today, warns accountants and CPAs to check their Errors & Omissions (E&O) insurance to ensure they have the proper coverage. E&O insurance provides coverage for claims made against accountants by reason of a negligent act, error or omission in the performance of professional accounting services.

Most likely, your firm carries some type of professional liability insurance, as many states, or state societies, require coverage. However, if your practice is currently uninsured, now’s a good time to review and evaluate your professional insurance needs.  The reason for warning: CPA liability has risen significantly over the past years as result of today’s ever-changing tax code and penalties for failure to report certain items. Also, with the emerging threat of data breaches and other cyber attacks, making sure you have Cyber Liability insurance as a part of your professional liability program or as a stand-alone policy is critical, as we discussed in a recent article.

When purchasing Accountant’s/CPA’s E&O insurance, it’s prudent to look for a partner that stays up to date with the changes that today’s CPA faces. Also important is ensuring that you are working with an insurance broker that understands the complexities involved in the work you perform. In addition, be sure your broker has longstanding relationships with insurers committed to providing a sound insurance E&O program. You want an insurer that is financially strong and offers continuity of coverage.

Review your E&O insurance with your broker carefully to understand what is covered, how the policy works and when coverage will kick in. For example, typically policies are issued on a claims-made basis. This means the policy will provide coverage for claims reported during the policy period, which are the result of on an act, error, or omission incurred on or after the retroactive date. The retroactive date in effect determines the beginning of coverage. It’s important to review this carefully with an insurance professional.

Also, if the scope of your practice’s services has expanded to include more complicated areas, such as financial and estate planning and advice, it’s important to review this with your broker and ensure that you are covered. As you take on additional work and broaden your services, there is a greater room for errors, putting you at a significant risk for malpractice claims. Potential liabilities that may arise during the course of business include:

  • Accounting errors
  • Data entry errors
  • Failure to follow Generally Accepted Accounting Principles
  • Failure to follow Generally Accepted Auditing Standards
  • Improper or incorrect tax advice
  • Failure to maintain appropriate documentation
  • Failure to perform background search
  • Failure to maintain appropriate safeguards
  • Failure to complete appropriate forms
  • Failure to perform appropriate peer review
  • Failure to detect fraud
  • Failure to meet deadlines

At Axis Insurance Services, we specialize in E&O insurance and would be happy to review your policy and assess where improvements can be made. Give us a call at (877) 787-5258.

 

 

 

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Blogged on: October 15, 2015 by Mike Smith
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