Accounting Insurance: A Safety Net For Accountants

Every accountant and financial planner has one recurrent fear…that he’s got his number crunching wrong and is being hauled to court by a disgruntled client. Accounting insurance for once is not a recommendation that accountants make to others for their safety, it’s a protection blanket, a safety net for them. Nothing can be more frightening for a professional to watch years of study and tenacious career building goes down the drain because of a negligence suit. Every accounting professional that provides financial advice and tax services to a client needs such insurance to protect from the unseen threat. It’s a choice between constant niggling fear and peace of mind.

A small mistake, an erroneous reporting of numbers, a simple miscalculation can snowball into something as serious as a perceived attempt to misrepresent an accurate financial picture or even an attempt at tax evasion. It could even be the result of a single piece of vital information that has either been forgotten by the accountant or overlooked by the client. But the client could end up having the tax authorities breathing down his neck, scrutinizing his records and charging him penalties and interest on the penalties. It is simply to provide the accountant a buffer from this situation that insurance companies now provide accounting insurance. Accounting insurance takes care of several requirements under the breadth of a single coverage. It covers the cost of legal fees that are incurred from attempting to protect one’s reputation in court. It protects against the loss of documents or personal information that the client had furnished his accountant with. Some insurance firms also provide legal advice as part of their coverage. Thus the accountant is guided through the intricacies of the court case by experts who advise him on every step of the way. Accounting Insurance also covers the cost of legal damages that have been claimed by the unhappy taxpayer who may have just taken one look at the whopping tax return that he has had to pay and has decided that his return was a botched and ill done job.

The accountant always has to remember that very often; business planning and projections are based on the figures that he produces and the balance sheets that he creates. In such a situation all business investments are made on the basis of such estimations and projections. Any business losses that may occur due to the planned projections going awry can be blamed on faulty accounting and a case can be slapped on the accountant leading to loss of not only his professional reputation but also his business itself. Across the globe it can be seen that the tax scenario is very fluid and tax laws are constantly in a state of flux. As the economic landscape undergoes changes, governments are always tweaking tax laws and procedures to provide maximum benefit to the citizens as well as the economy. In such cases accountants need to be continually abreast of such changes in the tax and audit landscape. Any slight inaccuracy in the data or a lagging behind on the current rules can spell disaster. It is accounting insurance that provides protection and insurance firms take care not only of offering comprehensive policies to accountants but also make the entire process of applying for insurance and filing claims simple and user friendly. They function on the premise that in a stressful profession like accounting, it is the insurer’s job to ensure that the accountant’s fears and problems are reduced and that stress is minimized.

About the author

Robert Ellis is a freelance insurance advisor who provides suggestions to clients on various aspects of life and business insurance cover. He is associated with Bizcover.com.au and provides guidelines on accounting insurance, professional indemnity insurance, IT insurance, business and office insurance and more.