What can go wrong?
It’s not just tax work that causes problems for accountants. Claims can arise from many areas including:
- negligent preparation of accounts
- failure to carry out auditing duties properly
- failure to file returns on time
- failure to detect fraud
- poor investment advice
- failure to advise or meet the stipulations of applicable law e.g. Companies Act 2006
Given the complex nature of the work accountants do, even if an allegation is unfounded it can be expensive and time consuming to defend.
Professional indemnity insurance is compulsory for members of the main professional accounting bodies, including the Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Chartered Accountants of Scotland (ICAS) and the Association of Chartered Certified Accountants (ACCA).They stipulate the minimum terms insurers must provide, the amount of cover practices must buy and maximum excess levels. The ICAEW and ICAS restrict the insurers that can write the minimum cover to ‘approved’ insurers.
What are insurers looking for?
Good experience, effective supervision of trainees and robust risk management procedures as demonstrated by a good claims experience.
Insurers consider any specialism in insolvency, tax mitigation or mergers and acquisitions work high risk – alongside audit work for quoted companies and work on behalf of financial institutions, celebrities and sporting professionals.
There are lots of insurers offering professional indemnity products to accountants and while they all offer the minimum cover outlined above, the protection they afford and premiums they charge can vary significantly.