CPA firms and accountants have to manage the risks that are associated with their profession through insurance. Accountants have to discuss with their clients the importance of protection from significant costs that may arise from a government tax audit.
Brokers must start communicating with CPA’s clients regarding their professional indemnity cover after it has been confirmed that a new scheme will not be in place before the old one expires on October 7. On October 8, all the public practitioners of CPA Australia can no longer use the letterhead or business documents that carry the statutory disclosure document otherwise they risk breaching the Australian Consumer Law.
CPA’s must advise their insurers of the change in circumstances on the limitation of liability and the need to purchase new insurance policies. According to PSC CEO Dr. Deen Sanders OAM, all CPA members are encouraged to take out additional insurance to cover the gaps that may leave them exposed to unlimited malpractice suits.
The CPA Australian Professional Standards Scheme that operates in all mainland jurisdictions to limit the liability of its members for negligence will expire. There is no certainty that a new replacement scheme will be in force soon because it usually requires about 6 months from publication approval for a new scheme to move through statutory approvals and receive final establishment.
According to CPA Australia, they are working on an active application with PSC and are currently finalizing plans to hold a national roadshow to discuss with members the importance of risk management and professional indemnity insurance including other optional support strategies.
Insurance brokers that have accounting clients should contact the accountants to determine if they will be impacted with the change and how they might be affected. Accountants have to review the level of their professional indemnity insurance and undertake the necessary steps to reduce exposure to unlimited malpractice suits.
Accountants face unique risks in the performance of their job that is why tax audit insurance is suggested for their protection. Accountants can offer the opportunity to participate to their clients because an audit activity instigated by the government will likely result into considerable professional fees.