Doctors and lawyers are at the forefront of those providing professional services. This extends to travel agents, real estate brokers, and accountants. Unfortunately errors and omissions in work performed can lead to litigation. A Certified Public Accountant (CPA) might be guilty of making an error that leads to a client being subjected to an audit. Any resulting litigation requires professional liability insurance, available through us risk underwriters, to help pay the costs for defense.
Any client open to such exposures will obviously benefit from having this coverage in place. Errors happen all the time, but some are more costly than others. If the issue can be rectified to the customer’s satisfaction, by filing an amended tax return to resolve the issue, that is a favorable outcome. But some problems can’t be so easily rectified. The customer may determine that their only recourse will be to sue your client for negligence. If this is the case, any acknowledgment of malpractice can certainly damage a good reputation, in addition to any serious financial damages that may be incurred.
CPA’s also have an ethical obligation
A tax preparer should be able to recognize that a mistake has been made, but in many instances they may be working on several documents at the same time. If a mistake is discovered too late, calling the client and bringing this to their attention is the proper thing to do. Accountants tend to be meticulous and take great care in their work, but some errors could result in a disgruntled customer taking legal action that may cost thousands of dollars to defend.
Hopefully the client understands that the intention was to do everything possible in their best interest, and to try to remedy the situation when things go awry. In some cases, however, the mistake may result in the IRS issuing penalties requiring necessary payments or adjustments.
CPAs and other preparers have an ethical duty with respect to any errors and omissions resulting from the work they submit. Because of the potential for malpractice damages and exposure requiring a legal defense as a result of a mistake having been made, professional liability insurance from us risk underwriters will aid your clients when they end up making costly errors on tax preparations.