Academic journal article Journal of Accountancy

Malpractice Defense Checklist

Academic journal article Journal of Accountancy

Malpractice Defense Checklist

Article excerpt

CPA firms of any size have a 5% to 10% chance of being sued for malpractice in any one year. The best defenses are a high-quality practice, thorough client evaluations and adequate professional liability insurance. In addition, all firm members should be aware of some prudent steps to avoid malpractice exposure:

* Use engagement letters that explicitly define the nature and terms of the services to be provided, the purpose of the engagement and the distribution of the report.

* Be selective when choosing clients and avoid those with high-risk characteristics. These include financial or organizational difficulty, involvement in illegal or possibly illegal activity, unreasonableness or uncooperativeness, fee pressures, frequent involvement in litigation, refusal to sign engagement and representation letters and weaknesses in or absence of internal controls.

* Recognize particularly hazardous engagements requiring unusual care, training and expertise. Examples are those involving new financings and divorce proceedings (specifically valuations of community property) as well as financial institutions, Securities and Exchange Commission filings, regulated or high-risk industries and tax shelters. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.