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Carlock Copeland Seminar – Risk Management for Audit and Accounting Firms

July 12, 2016

Joe Kingma and the Accounting Malpractice Defense Team presented Risk Management for Audit and Accounting Firms at The Buckhead Club on May 19.

Five Takeaways from the Carlock Copeland & Stair Accounting Risk Management Program

1. The Panama Papers, and Big Data in general, demonstrate the risk posed for accountants when clients hide or launder money offshore. An international consortium of major news sources is actively soliciting more leaks and tax officials from 28 countries met in April to plan a joint strategy to mine the Panama Papers for gold. High profile individuals whose names appear in the Papers searchable, online data base include: Lionel Messi, Jackie Chan, Simon Cowell, David Geffen, Pedro Almodovar, Nick Faldo, and Emma Watson. The database lists many U.S. CPA firms and diagrams their relation to various suspect transactions. Governments from Russia to Britain to Argentina have been rocked by the disclosures. Don’t get your firm’s name added to the list and avoid overly aggressive strategies. Protect your own files from those who might like to steal your clients’ confidential information.

2. Professional judgment is what you get paid for, but can also be what you get sued for. Audit engagements in particular require lots of judgment calls. Make sure your firm’s work reflects good judgment and that those who make the judgment calls are properly trained and professionally skeptical. If you have young auditors in the field without onsite partner supervision, talk through the tough issues with them in advance. Do what you can to make your firm’s judgment solid and defensible.

3. Read your insurance policies. Policy provisions may be negotiable and you may gain value in ways beyond premium reductions. Be very accurate when filling out your application and compare it to your website. Submitting a neat and accurate application can save you real money. Price should not be your only consideration and you should check to see which carriers treat their clients well. Insurance coverage remains very reasonably priced and cyber coverage is a great deal.

4. Jurors hold outside accountants to high standards when a client suffers from internal fraud. You must keep your eyes and ears wide open even if you are just doing a tax return or a compilation. Take another look at your engagement letters to make sure you have included all the damage limitations and disclaimers the laws allows and avoid engagements where the client’s lack of internal controls creates too much risk.

5. Accountants are getting sued for defamation even when they make statements in good faith and in the course of their clients’ engagements. Sometimes clients try to use your staff to say bad things about their employees. Don’t let your firm get sued for defamation that may not be covered by insurance.


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