Though the term “malpractice” is commonly associated with negligent acts in the healthcare industry, professional liability concerns extend to any business or professional. Under claims of errors and omissions, professional may be held responsible for third party claims of damages or loss arising from any mistake or poor judgment made during the execution of the job duties. For accountants, this means several claim scenarios.
Professional Liability Claims
The liabilities faced by a professional vary according to industry, but E&O for accountants deals with the harm (alleged or occurred) to a client as a result of financial advice, administrative error, or failing to deliver on a promise or contractual obligation. Common claims include the following:
- A data entry mistake that led to inaccurate financial record keeping
- Incomplete paperwork submitted to the IRS or other reporting agency
- Misinformation that led to overpayment to the IRS
- Lack of sufficient communication or attention to a client’s need or requests (claims of negligence)
- Third-party subpoenas or legal action involving an accountant’s client based on the financials arranged by the accountant
There is no limit as to what kind of claims could be open against an accountant. E&O insurance for accountants is one form of risk management against these scenarios, but accountants must do their due diligence in keeping accurate records, putting documentation and processing safeguards in place against errors, and communicating proactively and thoroughly with all clients.