Why Accountants Require Professional Indemnity Insurance

Many businesses and individuals put enormous trust on their accountants and expect sound advice to protect assets. However, when a business incurs loss, the accountant can be blamed for not providing reasonable advice. A full review will be performed to determine whether there was negligence or inadequate service to the client. The accountant’s protection will be accountant professional indemnity insurance that will cover legal costs and damages that may be awarded.

The most common examples of negligence claims against accountants include:

  • Incorrect valuation of business assets
  • Negligence in audits
  • Incorrect and inadequate business advice
  • Filing of tax returns missed deadlines
  • Undetected fraud
  • Errors in the preparation of accounting documents

A lawsuit can be filed alleging that the accountant has provided inadequate service that resulted into the client losing money. The legal costs and expenses that may be incurred by an accountant for his defence can be substantial and more so if the court decides that damages have to be awarded to the client. The best protection that an accountant can obtain is accountant professional indemnity insurance to alleviate the serious financial effects.

Aside from accountants, many professionals are required to have professional indemnity insurance as part of their respective industries’ regulatory requirements. However, even if the insurance is not compulsory to your industry, the professional indemnity insurance can make a big difference when faced with enormous legal fees and compensation payments. It also possible for lose income during the process of defending your innocence. Insurance will provide the necessary assurance to minimize any financial risks that may be faced during the litigation.

No matter how professional you are in providing service, there is always the risk that will make your profession vulnerable whenever a claim is made against you. Chances are that if a client suffered from huge financial loss, the blame will be placed on the service you provided.

People make mistakes whether intentionally or unintentionally. A single error in the tax returns can result into a tax audit. Accountants need the cover provided by accountant professional indemnity insurance to avoid the worst case scenario of incurring huge financial losses.

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