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Posted on: October 15, 2015 by Huntersure
Due to the nature of the work, accountants face an extraordinary amount of risk each day. As industries embrace technology for the betterment of their business, inherent cyber risks are an unfortunate pitfall. As data breaches are becoming increasingly common, Professional Liability for Accountants is a necessity. The following are common breach scenarios, resulting exposures, and ways in which to manage the adverse effects of these attacks.
According to Journal of Accountancy, these breaches can happen in numerous ways such as a lost or stolen device, hacking, fraud, improper disposal of data, and errant email messages. As a result, multiple claims can arise.
Types of Claims
Claims for Damages- The affected company or individual may bring claims against the accountant firm for direct claims and cross-claims as a result of the data breach. CPA firms may incur investigative fees in addition to costs to mitigate the situation. These include but are not limited to forensic services, PR costs, credit monitoring payments, etc. What’s more, cross-claims such as class-action suits against the firm can occur as a result of failure to adequately protect confidential client information.
Reputational Damage- Customer trust is likely to diminish after a breach occurs. Therefore, relationships can be damaged if the proper steps are not taken to remedy the issue. Especially in the case of consumers in the public eye, media attention can potentially sabotage a long standing relationship, reduce business and customer security.
Network Damages- Accountant firms are especially attractive to hackers as the financial information can be sold on the black market. Moreover, malware can disrupt computer systems and obtain confidential information.
Responding to a Breach
These incidents need to be managed and reported immediately to prevent further damage.
Evaluate Incident- Determine what information was compromised and identify if it was protected by encryption or not. IT professionals should be contacted to perform a thorough evaluation of damage, as well.
Consult with Legal Counsel- There are legal implications to cyber-attacks. Federal and state regulators and consumers must be notified if and when one occurs. Legal counsel can provide professional advice on divulging the information and managing the breach.
Notify Consumers- Identify the state’s requirements on notifying clients and determine whether or not the firm is financially liable for paying for credit monitoring for the affected entities.
At Huntersure, we understand the importance of cyber protection for accountant firms. Our professional liability program can help to mitigate the risks associated with breaches in order to secure confidential information and uphold reputation. For more information on our comprehensive coverage, contact us today at (855) 585-6255.
Posted in: Accounting blog