CPA Practice Advisor

APR 2012

Today's Technology for Tomorrow's Firm.

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INSURANCE E&O; Insurance: Providing a Safety Net for Your Practice Insurance Can Help with Risk Management and Business Continuity. D PROVIDERS: » Camico » Nationwide » CNA www.neacelukens.com/ » CPA Mutual www.cpamutual.com » Mitchell & Mitchell Insurance Agency, Inc. (877) 747-8705 http://michellandmitchell.com » Landy www.landy.com/index.html » Pearl Insurance » NAPLIA (800) 336-5422 (800) 447-4982 www.pearlinsurance.com/products/apl/ (866) 262-7542 www.naplia.com/Accountants/index.shtml oes your fi rm carry errors and omissions or professional liability insurance? Are you properly insured in the event a malpractice suit arises? Chances are your fi rm carries some type of professional liability insurance, as many states, or state societies, require coverage. However, if your practice is currently uninsured, now's a good time to review and evaluate your professional insurance needs. T e American Institute of Certifi ed Public Accountants recommends that every accounting fi rm carry professional liability and E&O; insurance to protect the fi rm from the potential liability that comes with some of the more complicated tax and accounting work. E&O; AND PROFESSIONAL LIABILITY INSURANCE (800) 652-1772 www.camico.com/portal/server.pt » AICPA (AON) www.cpai.com/business-insurance/ (888) 490-1549 www.nationwide.com/accounting-offi ce- business-insurance.jsp (312) 822-5000 www.cna.com/portal/site/cna » Neace Lukens (877) 632-2358 (800) 543-3029 Businesses and individuals rely on tax and accounting professionals for fi nancial advice, estate planning, tax preparation and filing, audits and various other fi nancial transactions. Shayna B. Chapman, CPA, Managing Member of Chapman & Burris CPAs LLC in Ohio agrees with the AICPA that tax and accounting practices should have some type of professional liability insurance. "I can't imagine not having insurance or why a fi rm would opt not to carry it," she said. "It makes sense to have insurance. It gives you a safety net. Personally I want to know that I'm covered in case something happens." T e fi rm, which off ers accounting, taxation and business consulting services, has always carried insurance as long as Chapman can remember. Today, it is required by the state of Ohio because the fi rm has three CPAs. Ohio requires that any practice with two or more partners carry professional liability insurance. The amount of insurance required varies depending on the number of partners. However, she notes that the fi rm carried liability insurance when it was a sole proprietor- ship as well. A practice may fi nd that its insurance rates increase as a result of broadening the scope of its services to include more complicated areas, such as fi nancial and estate planning and advice. T is is due to the fact that these areas carry greater room for errors, put ing professionals at a signifi cant risk for malpractice claims. Potential liabilities that may arise during the course of business include: • Accounting errors • Data entry errors • Failure to follow Generally Accepted Accounting Principles • Failure to follow Generally Accepted Auditing Standards • Improper or incorrect tax advice • Failure to maintain appropriate documentation • Failure to perform background search • Failure to maintain appropriate safeguards • Failure to complete appropriate forms • Failure to perform appropriate peer review • Failure to detect fraud • Failure to meet deadlines Carrying professional liability or E&O; insurance will provide profes- sionals with coverage for any claims made against them for negligence, error or omission while performing profes- sional tax and accounting services. When shopping for insurance, it's important to weigh coverage against the needs of the practice. Chapman suggests looking what's being off ered and the quality of the coverage. "Of course we look at price because we have to be able to aff ord the coverage," says Chapman. "But we also look at the kind of protection they will provide. It's important that they off er protection for the services that we provide to our clients and the technology that we use." Chapman & Burris hasn't had to access their insurance and they have been able to resolve issues without needing to use the insurance, according to Chapman. However, she still believes that it's a great investment for fi rms even if they never use it. "Liability insurance is a good mar- keting tool for fi rms," says Chapman. "When meeting with a potential client, you can say, 'We are going to provide the best possible service to you. And in the event that something does go wrong, we're covered up to this amount to protect you.' It gives the client confi dence in you." She also suggest clients ask profes- sionals about their insurance coverage before they start working together. It's important for clients to know what type of protection their tax or accounting professional can off er. T ere are many avenues available that provide professional liability and E&O; insurance for fi rms. For example, the AICPA offers several insurance plans through AON which include options for professional liability, employment practices liability and specialty coverage for unique insurance needs. Professionals that are interested in acquiring or modifying their insurance coverage can consult with one of the insurance companies listed at the bot om of this article or check with their local state CPA association for a list of companies that serve their area. By Taija Jenkins, Associate Editor Taija is the Associate Editor for CPA Practice Advisor, managing the website and weekly newsletter, CPA Weekly Advisor. She is a graduate of Bradley University. Taija can be reached at taija.jenkins@ cpapracticeadvisor.com or follow her on Twitter @TaijaJenkins.

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