Dissatisfied clients are a source of concern for CPAs. A costly mistake can easily lead to a lawsuit and ruin what was perhaps a great working relationship at one time. One way to be protected against claims of errors or omissions is with the support of professional liability insurance for accountants. Another way is to be thorough and cautious in selecting the clients you wish to represent.
One bad client can lead to major issues
Remember that it’s better to sever relationships with a questionable client before things turn ugly. No amount of fees generated from a client with a libelous history is worth the headache, especially when it results in a claim being filed against you. As an accountant, you must take a thorough look at the reputation of clients you take on, always check references, and even investigate into why they’re changing accounting firms at the present time.
Start out by sending a concise engagement letter, and if your new client refuses to sign it, that’s likely to be a bad sign. If clients are uncomfortable signing a letter, let them know that the insurance company requires it. If you foresee this attitude as an indication that they will present problems down the road, kindly dismiss yourself from providing your services. In any event, engagement letters should be updated annually or whenever additional services will be performed.
Avoid claims of embezzlement and other violations
Unethical behavior by a client is one of the foremost reasons for disengagement and you may even want to consider that it may be safer to take a stand against a client than it is to defend them in a suit brought on by a third party.
Although technical errors are often simply honest mistakes, the majority of technical errors can and should be avoided. Have an independent review of the work done by the accountant’s office before it is released to the client. This will often catch errors and will hopefully minimize the possibility of a liability claim.
Claims are an unfortunate result of dissatisfied clients, and these situations are difficult to defend even when fully disclosed. Protect your interests with professional liability insurance for accountants. Speak with an agent to discover just which policy will best work for you.