Indemnification: Understanding Your Risks

By Suzanne M. Holl, CPA

CPA firms are experiencing an uptick in clients trying to embed indemnification and/or hold-harmless clauses in various agreements with the firms. Many of the clauses are inappropriate for CPA services or are overly broad, even to the point of shifting all liability to the CPA firms. Here are some considerations to weigh before agreeing to any such clauses.

Client Assessment Checklist

By Suzanne M. Holl, CPA

Any client, whether new or established, can become problematic for a variety of reasons. For example, a problem client may—

  • be unhappy with the results of an engagement, though there was nothing wrong with the services performed;
  • believe that the CPA rendered substandard services (especially if the client is unhappy with the results);
  • manage financial affairs poorly, creating maelstroms for which the CPA is held responsible;

Disappearing Client Funds

If your firm is responsible for controlling client funds, then your internal controls should be robust enough to prevent the misuse of funds. The types of engagements providing this service range from basic bookkeeping and bill-paying on behalf of clients to business management engagements in which the firm controls the client’s day-to-day financial affairs. Other high-risk engagements prone to misappropriation include executor and trustee engagements.

Pages

Latest Articles