Embroker’s Accounting Practice

Redefining the way accounting firms purchase insurance, utilizing technology and deep insurance expertise from brokers who genuinely understand the industry.

Insurance for Accountants

Accountants are a logical, straight-forward set of professionals critical to our economy who produce financial reports, review tax documents, and audit other accountants’ work. The scope of services provided by Certified Public Accountant (CPA) firms has grown immensely over the last few years. But no matter how good you are at your job and how much experience you have, any logical accountant knows mistakes are bound to occur.

When a deadline is missed, a tax law misapplied, or a fraud goes uncovered, it’s not pleasant. At best, these issues result in a distraction and are likely to involve legal fees. One step further can easily result in legal actions against you coming from the clients, investors, or other third parties that have been negatively affected by your error.

That’s why smart CPA’s and their accounting firms are always covered by the right insurance policies that protect them from these types of situations. Whether you or someone in your firm makes a mistake in the course of providing professional services, insurance can help make sure that your personal assets are properly protected.

We wrote this guide to help you, the reader, understand both the basics of insurance for accountants as well as some more advanced considerations. Our hope is that you walk away from this article a more empowered buyer, with a better understanding of the risk you can transfer to other parties via the right insurance coverage.

We’ve quickly become the leading digital insurance broker for accounting firms. If you’d like help, we’d invite you to talk with a broker or get started by creating an Embroker account.

Our highly experienced insurance experts will work with you to gain a deep understanding of your unique needs before negotiating a customized policy on your behalf. For more clarity on pricing, your business will be benchmarked against similar firms and accountants in your vertical.

Why Do Accountants Need Insurance?

In today’s litigious environment, it’s incredibly easy for an agitated client, investor, or other outsiders to file suit against an accountant or any other advisor. Any professional associated with watching risk for CPA firms can tell you countless stories of firms providing good work, sticking to the scope of their engagement letter, and still getting hit with a costly professional liability claim.

CPA firms, tax advisors, and even bookkeepers get hit frequently with claims. The tax laws are constantly changing and the expectation of the client is such that errors are not readily acceptable. During difficult financial times when people lose money on investments, they are quick to look for ways to recoup their losses, and blaming the accountant for mistakes is sadly one of those methods. With the bar being set so high, it’s pretty easy to see why claims are alleged against CPA firms so frequently.

The very nature of being a CPA or any professional advisor exposes you to the risk of malpractice claims. Running your firm, servicing your clients, trying to get new clients, and tending to your daily life are time-consuming enough, can you imagine the added burden of a malpractice suit, even if your work product was rock solid? Regardless of the complexity of the claim, these suits require legal fees, document production, lost billable hours and precious energy consumed instead of serving your clients and growing your business.

A high-quality insurance program produced by a knowledgeable broker eases the burden of a malpractice claim.

For decades now, accountants professional liability policies have experienced tax issues as the most frequently reported claims and audit issues as the most severe. In recent years, carriers have seen an uptick on matters relating to trust and estate work, along with general consulting.

Malpractice claims related to auditing are often the result of an accountant’s failure to detect fraud. While your engagement letter may waive the accountant’s responsibility to detect fraud, clients and investors will certainly claim otherwise and if investors have lost money, the engagement letter scope doesn’t always hold up.

Also, with older generations transferring wealth to younger family members, with millions of dollars at stake, it’s easy to see how CPAs who are acting as trusted advisor and are right in the middle of the action can be susceptible to various claims. Family members who believe assets were not well tended to or were dispersed inaccurately will not hesitate to find a plaintiff attorney to bring suit against the accountant trustee.

In recent years clients adding technology and the accountants’ involvement adds a new level of exposure. Your scope of work becomes more complex as you look to advise on the proper usage of the latest accounting software. Most accounting entries are not manual entries anymore but are the subject of multiple users from varying inputs, as the case is with cloud technology.

The other natural exposure to risk via technology is the risk hacks, cybercrime, theft of personal information, theft of trade secrets, and other technology exposures. This article spends a majority of time talking about professional risk, but cyber risk must be addressed as well, preferably via a stand-alone policy.

And in the end, no matter what the reason for the damages are, accountants and professional advisors could easily be blamed in an effort to recover damages to the client or other third parties.

Highly-Publicized Examples of Insurance at Work for Accountants

Accounting Insurance Costs

When applying for accounting insurance, there are many things that carriers are going to be taking into consideration when trying to arrive at a price for the coverage that you need. The leading drivers of cost are revenue over three years, areas of practice, geography, and claims history.

Once the above key drivers are taken into consideration the premium is fine-tuned based on digging further into your areas of practice (bookkeeping, audit, valuations, etc.), risk management (engagement letters, suits for fees), and insurance limits you want to purchase.

Getting Started

Not sure if you’re getting a fair deal?

A frequent question we hear — and a common problem with insurance underwriting in general — is that no one really knows how an underwriter arrives at a premium.

Embroker believes in giving our clients better choices using data and transparency. We benchmark all of your policies against similar firms/accountants in your vertical, then procure multiple quotes from an independent broker. We also cross-reference your costs with firms of comparable size, policy limits, claims history, and risk tolerance.

Once set up on our platform, our tools and data ensure you’re adequately covered, even as market conditions change and your business grows.

Accounting professionals require unique insuring expertise and experience. Embroker helps you get the best coverage at the best price, and we start a simple audit of your current policies. Beyond that, we also offer advice on risk management challenges such as loss control and risk financing.

If you need more help or information, you can reach out to our team of expert brokers. If you prefer to get started on intelligent quotes, create your Embroker account today.