More Advice on Risk Management

Source: Practical Accountant

Insurance companies CPA Mutual, CNA, and Camico provide case studies in losses incurred by CPA firms and offer the following advice:

• Increase your due diligence on new clients when the engagement has a comprehensive scope.
• Engagement letters should clearly set forth limitations of the engagement, especially in M&A transactions. Be especially wary of buyers or sellers shifting their responsibilities to the CPA.
• All discussions, decisions, and actions related to an engagement should be documented.
• Be certain you have the ability and the resources to do the job.
• Look at conflict-of-interest situations from a third-party perspective.
• If you believe a conflict of interest won’t keep you from being objective, disclose this to the client and ask for its consent in writing. If you believe a conflict of interest will keep you from being objective,, refer the business services to other qualified CPAs.
• If you have prepared a joint tax return for a couple in the process of divorce, seek advice from counsel and ask for waivers of confidentiality and conflict of interest.
• Look at each situation as a juror might. Cases are often settled on the basis of probable jury actions.

The complete case studies are found via the link below Also, click here for another article on the subject from Bowman’s First Alert.

From Practical Accountant, November 2006, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 800-221-1809. For the complete article, click on the following link: http://tinyurl.com/y7swd7.