As they head into tax season, accountants are being reminded that well over half of claims against accountants come from client tax work.
Findings from a claims study conducted by CAMICO Mutual Insurance Company, which specializes in professional liability coverage for Certified Public Accountants, indicate tax work is the most frequent type of claim, generating the largest total of claims dollars incurred. The insurer cites two reasons: the complex and continually evolving tax codes, and issues regarding the engagement between CPAs and their clients.
The study included the claims experience of all of the insurer’s nearly 7,000 policyholder firms in 44 states, focusing on the major causes and types of claims incurred by CPAs nationally.
“The technical nature of this area of taxation places most of the burden for decision-making on the CPA,” says Ron Klein, vice president of claims for CAMICO. “There is usually a limit to how much the CPA can ask the client to decide in technical tax issues. It’s much like a patient seeing a doctor about a serious, complex medical condition; the problem and treatment are so critical that the patient will ultimately go with the treatment the doctor recommends.”
After taxation, CAMICO’s survey of policyholders found the following practice areas to be of highest risk for liability claims: financial statements, investment fraud, and defalcation (embezzlement).
Klein has developed a list of tips for CPAs as they enter tax season. The list is available at http://www.camico.com/website/press_releases.asp#claimsadvice.
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