Date: 14/05/2022 | Written By: Karl Hodson
As an accountant and part of a team advising businesses, your focus will typically be on providing the best possible guidance and services more broadly.
However, there are also times when issues and risks arise for accountants that makes it imperative for them to have professional indemnity insurance in place.
This article looks specifically at what some of the foremost risks are for accountants in 2022.
Cyber security has become a hugely important consideration for businesses and organisations worldwide in recent years and the threats in these contexts continue to evolve. Like any other business, accountancy practices are being targeted by so-called ransomware attacks, which can leave firms and their staff locked out of their own systems for extended periods of time.
Inevitably, being locked out of their own infrastructure creates a huge amount of upheaval for accountancy practices and leaves them open to claims that they should have done more to protect themselves from the associated threats.
Prevention is certainly better than cure when it comes to cyber security, so it is imperative for firms to have the right advice and policies in place to protect themselves and their data as much as possible.
If an auditor fails to identify misstatements within the accounts of a client company then that oversight can have very significant ramifications down the line, particularly if the client company later ends up in financial peril, company administration or liquidation. This has been evidenced recently in the UK by high profile cases including Carillion and Patisserie Valerie.
Becoming embroiled in cases where auditing failures are shown to have taken place can be seriously bad news for accounting firms from a financial perspective, but also from a reputational standpoint.
A common area of concern for accountants is missing deadlines and failing to comply with HMRC timeframes which can then lead to fines and penalties. The main way to avoid seeing these scenarios happen is to instantiate suitably robust systems that make the missing of deadlines a rarity. However, these issues can still arise and create problems for accounting firms and their teams.
Accountants can sometimes find themselves being accused of failing to minimise tax liabilities and claiming the relevant tax relief when disposing of a business, resulting in an unexpected tax bill. It is therefore important to be aware of this risk and insure against accusations of poor advice.
Deals to buy or sell businesses will often give rise to a variety of disputes among owners and their accountants, with the latter sometimes finding themselves being blamed for certain failings they may or may not have been responsible for.
Understanding and efficiently managing a full range of company tax issues is complex. As such, accountants fulfil a vital role as service providers, although as with every profession, service providers can be exposed to negligence claims on the rare occasion which professional indemnity insurance can provide protection against.
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