Professional Liability Claims Increasing

Source: Accounting Today

This article warns CPAs that the economic downturn will increase claims from clients suffering financial losses both from declining revenue and employee theft. CPAs have been sued even when the only service they provided was tax return preparation.

The problem may be compounded if the downturn causes firms to accept clients they would not accept in good times. Firms may tend to accept engagements for which they are not qualified. Areas of potential risk in this regard are business valuations (more companies are for sale) and litigation support (increasing divorce rate).

The engagement letter should clearly delineate the services being performed, and the consequences of failure to pay.

Suing for fees often results in malpractice counterclaims. Avoid them by resigning from delinquent accounts before they become excessively high.

For the complete article, click here and select the article "Malpractice Claims on the Rise" under Practice Resources in the July 8, 2009, issue.

From Accounting Today, July 20, 2009, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 800-221-1809.