Exploring Accountant Liabilities

Posted on: June 22, 2021 by Huntersure LLC.

If some of your insurance clients include professional accountants, they likely have some questions about the liabilities in accounting. When exploring various types of liabilities with your clients, it’s important to help them understand both accountant professional liability and business liabilities that they may be in charge of handling for their company. The next time you sit down with your client to review their insurance coverage, you may want to pull out this guide to help them understand the various liability issues they may face in their line of work.

Understand the Difference Between Business Liabilities and Professional Liabilities

Before you can get into the details, you should make sure your client understands that accountants face professional liabilities, for which specialized liability insurance may be needed, and business liabilities, which involve the debts their company takes on. Accountants are frequently tasked with overseeing business liabilities, ensuring all the numbers add up, and spotting potential financial issues. There are a few main types of business liabilities your client should be aware of, namely:

  • Short-term liabilities that usually must be paid off within a year, including expenses such as wages, taxes, invoices, and short-term loans
  • Long-term liabilities that may include business lines of credit, deferred compensation plans, and long-term loans
  • Regular, recurring liabilities that may also be long-term, such as employees’ pensions or healthcare plans

Excess Business Liabilities Can Lead to Serious Financial Issues

Another issue that your client needs to understand, especially if they’re in charge of their company’s balance books, is that too many business liabilities piled up can lead a company into serious financial trouble. Excess liabilities usually mean that the company has bitten off more than it can chew financially and may now be facing burdensome corporate debt that outstrips company revenue. For this reason, it’s essential for accountants to keep a close eye on all business liabilities and to alert higher-ups when the books start to seem unbalanced.

Accountants Should Be Aware of Common Professional Liabilities, Too

Beyond business liabilities, there are also professional liability issues for accountants to be aware of. Professional liabilities involve the accountant’s responsibilities and the risk of lawsuits in the event of a breach of those responsibilities. Your client may face professional liability lawsuits if they are accused of:

  • Negligence
  • Malpractice
  • Tax return errors
  • Failure to file required forms
  • Calculation mistakes
  • Overstating inventory

Insuring accountants means helping them to reach a solid understanding of both accountant professional liability and business liability issues that they’re likely to encounter at some point in their work. As you explore various liabilities and potential insurance solutions with your accountant clients, keep this short guide handy to help explain the major concepts easily and efficiently.

About Huntersure

Huntersure LLC is a full-service Managing General Agency that has provided insurance program administration for professional liability products to our partners across the United States since 2007. We specialize in providing insurance solutions for businesses of all sizes. Our program features can cover small firms (grossing $2.5 million annually) to large corporations (grossing $25 million annually or more). We make doing business with us easy with our breadth and depth of knowledge of E&O insurance, our proprietary underwriting system that allows for responsive quoting, binding and policy issuance and tailored products to meet the needs of your insureds. Give us a call at (855) 585-6255 to learn more.

Posted in: Accounting