Because accountants and accounting firms provide financial services to individuals and businesses, accountant insurance is vital. Most Certified Public Accountants assist with estate planning, financial advice, audits and tax preparation and filing. In the process of conducting these services, accountants open themselves up to a variety of legal exposures:
- Errors in accounting
- Errors in data entry
- Failure to complete forms
- Failure to detect fraud
- Failure to maintain appropriate documentation
- Failure to maintain appropriate safeguards
For these reasons and more, the American Institute of Certified Public Accountants recommends that all accounting firms have accountant insurance in the form of a professional liability insurance policy.
What Professional Liability Insurance Covers
Essentially, accountant’s professional liability insurance protects you should a client allege that your work was a direct cause of a financial loss for them. It provides this protection in three main ways:
- Covers defense costs
- Pays you for wages lost while you’re in court rather than at work
- Compensates clients for any losses or damages that may be required by the courts
Not only does the AICPA recommend that accountants have professional liability coverage, many clients require their accounting firms to carry it as well. Remember, accountant insurance is your best defense against legal claims, and the professional and financial consequences of those claims.