If part of your daily business as an insurance agent is working with accountants, part of your responsibility may be informing them of what they need to know to avoid malpractice lawsuits. Malpractice suits are usually more famous when applied to the medical or legal fields, but can happen in accounting as well, especially if your client is not aware of factors that can increase the likelihood of a lawsuit. Fortunately, there are some core facts that you can use to inform your client for their own protection and professional well being. Here’s a closer look at what leads to accountant malpractice lawsuits, and how they can be avoided, that you might find helpful for informing your client.
Several Types of Misconduct Can Result in Malpractice Suits
Although a malpractice suit might sound like a catch-all, several types of situations can lead to these legal suits, usually related to misconduct of some sort on the part of the accountant. For example, if an accountant conducts an audit but fails to identify fraud, makes mistakes on a tax return, commits any fraud, or simply keeps weak finance records, any of these situations could end in a malpractice suit.
Accountants Must Follow Professional Standards for Their Conduct
Just as is the case with any other profession, there are certain standards for conduct in the accounting profession that anyone wishing to craft a career in the field must follow. In accounting, the conduct rules are very well defined and published regularly by the AICPA, or the American Institute of Certified Public Accountants. Your client may have already heard of these standards, called GAAP, short for Generally Accepted Accounting Principles. While there are several of these standards that your client will need to master, a few of the most important ones are:
- Accurately representing the facts and not consciously misrepresenting them
- Maintaining continuing education requirements to license
- Avoiding any conflicts of interest
Most Successful Suits Are Centered on Negligence
If your client does happen to end up embroiled in a malpractice lawsuit and wants the best chance at a good outcome, they need to demonstrate that they were not negligent. Most successful malpractice suits against accountants involve negligence or the accountant having behaved in a way contrary to what is expected of them.
An important part of working as an insurance agent is making sure that your clients are fully informed about the factors that can increase their legal and financial risks. While you might not have known the details of accountant malpractice suits before, this core information can help you gain a deeper understanding of them. You can use these facts as a guide to help your accountant clients better understand malpractice suits.
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