Following professional standards alone may not be enough to avoid a claim.
Jury or claims standards are created by juries (members of the public) when assessing situations with the benefit of hindsight. Jurors rarely care as much about CPA professional standards as they do about CPAs “getting it right,” which often means protecting the public interest, uncovering fraud regardless of the services being rendered, advising and informing clients of all significant matters (especially risk and how to avoid it), and documenting all significant communications, decisions and observations.
The expectation that CPAs will uncover fraud can be difficult to meet, but CPAs can address the issue by advising and informing clients about fraud exposures, and by offering to help clients address their exposures. CPAs should also document the advice and warnings provided to the client in case a dispute arises. Also, while CPAs are not required to verify certain types of information in engagements such as tax return preparation or compilation of financial statements, if something looks irregular, it should be investigated, documented and communicated to the client.
For more information about CPA firm insurance issues, call CAMICO at 1.800.652.1772 or visit www.camico.com.