There are several areas of concern for accountants and CPAs when dealing with dissatisfied clients. One way to protect against claims of errors or omissions is to be backed by a solid CPA professional liability policy. Another way is to be choosy in selecting the clients you may or may not wish to represent.
Bad client selection can be a major issue
Any fees you may generate from a questionable client are never enough when a claim is filed against you. As an accountant, you should take a thorough look at the reputation of your clients, check references and determine the reasons why they are changing accounting firms in the first place.
Always send a concise engagement letter, even if your client refuses to sign it. If clients are uncomfortable signing a letter, let them know that your insurance company is requiring it. Their unwillingness to sign may be an indication that they will present problems down the road. Engagement letters should be updated annually or whenever additional services will be performed.
Be cautious of claims of embezzlement and other infractions or violations
Nearly half of all claims over $100,000 are due to fraud on the part of the client. Unethical behavior by a client is one of the foremost reasons for disengagement, and you may even want to consider that it may be safer to take a stand against a client than it is to defend a suit from a third party.
Although technical errors are usually honest mistakes, the majority of technical errors can be avoided. Appropriate independent review of the work within the accountant’s office, before it is released to the client, will often catch errors and will minimize the possibility of a professional liability claim.
In the event of a claim, these situations are difficult to defend even when fully disclosed. Protect your interests at all times with coverage for CPA professional liability insurance. Speak with an agent and find out which policy will best work for you.