IT Risks, Lawsuits and AICPA Standards

“Managing IT Risks and Compliance” Tops Tech Initiatives

A survey of 1,670 American Institute of CPA (AICPA) members nationwide revealed where firms see their information technology needs in the next year.  The AICPA asked members what their firm’s top IT initiatives would be for the upcoming year and compiled the top ten responses.  “Managing and retaining data”, “Securing the IT environment” and “Managing IT risk and compliance” where the top three most cited initiatives.  The full list can be viewed here.

This highlights the need for firms to carefully consider how they transfer the risk of lost client data, hackers and system down-time that can lead to large expenses and lost productivity, explains InsureAccountants.com.  Cyber insurance is quickly becoming a necessary policy for firms to purchase.  It is important to understand whether a firm has exposure to first party loss, third party loss or both.  Some policies contain some “cyber” coverage already, but a careful review of the policy wording may reveal gaps in coverage that need to be filled.

Professional Golfer Sues Accountant

A federal judge has ruled that Hank Kuehne, a professional golfer, can sue his accountant in Florida for allegedly not disclosing that he owed back taxes and penalties to the IRS. Kuehne discovered he owed over $500,000 after another accountant took over. It was also discovered that the accountant, Thomas Bertsch of FSM Capital Management, attempted to settle the debt for $90,000 and did not respond to a counteroffer by the IRS for $342,000.

The ruling is available here.

AICPA Proposes New Standards for CPA Financial Planners

The AICPA Personal Financial Planning Executive Committee has released a revised set of standards for CPAs acting as financial planners.  The committee has revised these standards to reflect the ever-increasing trust the public is placing in their accountants for broad range of financial related advice and services.  The standards contain wording on working with third party service providers, responsibilities of the CPA when dealing with the client, the duties owed to clients, and what financial planning services should entail.

The standards have been in place since 1992 and were most recently updated in 2010.  During the 2010 revision, only a few states adopted them as the standards to be used.  The AICPA and committee has opened the proposal up for public comments until September 9th.

In terms of risk management and professional liability claims, these standards are very important to take note of, explains InsureAccountants.com.  In the event of a lawsuit, the judge, mediator or jury will look to these guidelines (among others) to establish whether a firm or an individual acted in a manner considered to be standard and proper in the industry.  If the firm acted outside of these established rules, the firm’s actions become harder to defend and justify.  Alternatively, explaining how a firm acted becomes easier when the firm can point to well-established business models and industry experts as the source of their methodologies.

 

Lawsuits can pose a risk to any accounting firm and it is important to have an insurance provider and an insurance broker that work with you as a team.  To discuss your firm’s insurance programs or further risk management techniques, contact InsureAccountants.com today.