There are a lot of risks involved in providing services in the strictly regulated accounting sector. Tax investigations are now more frequent than ever and they can pose a risk to the accounting practice as well as the client. Having the right cover in place will help preserve the accountant-client relationship during the most difficult time.
Accountants and other financial professionals understand the personal and professional risks involved in the preparation of tax returns for their clients. In order to mitigate the risks; accountants make the effort to reduce any errors particularly in accounts that are too complex. However, in many instances, clients can be difficult and they fail to reveal all the information that will ensure compliance with the law.
The accounting industry is heavily regulated but sometimes the most common risks are related to state and federal requirements. Requirements often change and accountants face risks of not knowing the latest changes. For the most part, it is understood that the accounting industry is well versed with the requirements but sometimes, following it to the letter can be very difficult.
Due to the complexity of the profession, an accountant usually needs professional liability insurance instead of facing a claim for negligence. Clients will hold the accountant responsible if they experienced a negative financial impact due to an error in tax preparation. Accounting firms that handle auditing and valuation for their clients is exposed to more risks because there are investors that will make financial decisions on the basis of the valuation. Negligence can lead to lawsuits but insurance can mitigate the costs.
In tax preparation, accountants usually have a professional liability which makes it important to remain on the right side of the law. During tax season, workload increases and requires the protection of insurance against liability. Insurance is the best proactive protection to mitigate financial losses.
There is good reason why tax investigation insurance is recommended for accounting professionals. Substantial professional fees can result from a tax investigation on the client. By introducing insurance to the client, both the accountant and the clientare protected from the potentially significant costs of tax investigation and audit activity.