Tax-Season Staffing Requires Special Considerations

Accounting Today – an industry trade journal – has released an article outlining some steps tax firms should take if they plan to staff up this tax season.  The article explains that new staff might not have the institutional knowledge of a firm’s procedures, or be up to speed on the 2012 tax requirements.  It is important to create documents and policies that address these issue.  Also listed are sources for additional best practices. would like to remind firms that new employees or contractors also means additional risks.

  • Mistakes in client work can lead to accounting malpractice claims,
  • Harassment in the workplace can lead to employment practices claims,
  • Rogue staff can lead to theft of monies by employees and
  • Careless contractors can lead to a breach of confidential client data.

It is important to exercise due oversight of additional staff and to make sure that a firm’s insurance policies are adequate to handle the increased load and provide coverage for the work of independent contractors – not just employees.  Contact us for a review of your firm’s policies or to discuss additional ways to protect your firm during the upcoming year.




Incomplete Tax Returns to be Scrutinized

The IRS warned tax preparers and CPAs that use electronic filing not to file tax returns this year before all relevant tax information has been received.  The IRS has noticed a trend for tax preparers to rely on pay stubs rather than the W-2 and other income documents obtained at the year’s end.  The IRS warned that they “may warn or sanction Providers that violate IRS e-file rules and requirements.”  This will include reprimands, suspensions, or expulsion from the e-file program. reminds clients to remain up to date and in compliance with all state and federal laws in order to prevent claims of accountants malpractice.  Contact us to discuss ways to further protect your firm.







Employment Practice Claims see Record Year in 2012 and Gives Warnings for 2013

While 2013 will bring many changes to the financial and economic landscape, an accounting firm’s responsibility to risk management remains the same.  Many firms take time to assess their internal practices during a calendar year close and Calculated Risk Advisors would like to remind firms not to overlook one particular area – employment practices lawsuits.

The Equal Employment Opportunity Commission (EEOC) is tasked with managing, investigating and prosecuting violations of federal employment law.  In 2012, the EEOC reported findings which may be used as an indication of what is to come in 2013. New employment-related complaints were 111,139 (down slightly from 112,499 in 2011), while resolutions remained stable from previous years just below 100,000. The dollars recovered by the EEOC were the highest ever, however, collecting $44.2 Million through litigation and $365.4 million through administrative enforcement.  The EEOC appears to be taking larger cases on average and also closing cases at a more efficient rate.

It is clearly the case that a firm should have all employment practices in compliance with all statutes. In reality, however, each firm has limited resources that must be invested with care. Understanding where the EEOC is concentrating its efforts can help a firm decide how and where to invest its capital in order to best protect its firm. Based on the banner cases of 2012, Calculated Risk Advisors recommends that accounting firms pay particular care to the following employment perils:

• Hiring Practices – A global beverage company used previous arrest record to make decisions on hiring. An EEOC investigation discovered this practice disqualified a disproportionately large amount of black workers. To settle the issue, the company agreed to pay over $4 million.
• Disability Discrimination – A large trucking company stated in their HR documents that any employee who required more than 12 weeks of leave for any reason would be automatically terminated. The EEOC ruled the inflexibility of this rule discriminated against those with disabilities. The company agreed to pay $4.8 million to settle.
• Retaliation claims – When an employee experiences unfair or wrongful treatment after lodging an internal complaint with a company, the employee can report retaliation. The EEOC is seeing an increased number of these complaints and pursuing active investigation of them.

Utilizing proper risk management practices in a firm can help prevent employment related claims. A firm should consider incorporating these practices as a result of the findings we see from the EEOC:

• Disparate Impact Studies – Before implementing a new policy within a company, consider whether the impact of the policy will unfairly impact a certain class of employee more than the rest.
• Release of Liability – If a firm needs to terminate the employment of an individual, the firm should obtain a signed release of liability.
• Out-placement services – A firm that provides services to the terminated employee that assist in the transition see a lower rate of claims.
• Avoid Blanket Policies – Avoid terms such as “any”, “always” and “without excuse” as they are red flags to the EEOC and are being investigated.

Protecting your firm is a matter of implementing proper internal practices and purchasing insurance. To discussion additional ways to your firm can protect itself, contact Calculated Risk Advisors today.

Tax Preparers Receive Gift from IRS

In 2012, the IRS announced that all registered tax preparers would need 15 hours of continuing education (CE) credit each year in order to maintain their status with the IRS.  Many tax preparers had difficulty meeting this requirement and the IRS has recently announced that they will allow some leeway in this matter.  According to the IRS Facebook page, Carol Campbell, RPO Director, explained that a tax preparer had the 2013 calendar year  to complete any un-obtained CE from 2012.  The tax preparer would still need to complete a full 15 hours of CE for 2013. reminds clients that accounting malpractice is a risk faced simply by performing the services, whether CE is obtained or not.  It is important to maintain strong internal controls and adhere to all standards set by state, federal and administrative bodies.  Contact us today to discuss ways to best protect your firm from risk.






Economic Uncertainty Leads to Dangerous Cuts

Many articles published in the last two months of 2012 have punctuated the concern the private sector has over the  financial and economic uncertainty the country faces.  This has led many business owners to delay updating their technology or equipment; freeze hiring; or even make cuts to budgets, staff and systems.  The graph below (taken from on 12/21/2012) shows the largest concerns businesses face. advises that firms must remain diligent in their risk management practices and oversight of work products, and stay current on legal issues impacting their business.  Failure to do so could lead to a lawsuit whose expenses would have a negative impact on the business with certainty.  Contact us to discuss ways to structure your accounting firm insurance program to save money and to make certain that you have the proper coverage in place to protect your firm.

PCAOB and International Regulators File Joint Report

After the PCAOB released its findings of an audit done on member firms, it has teamed up with the International Forum of Independent Audit Regulators (IFIAR) to release a global report on audits.  IFIAR is responsible for regulating audit firms overseas.  In its first-ever joint report, the two groups outline common issues plaguing many audit firms today.  The findings include:

  • Professional skepticism
  • Group audits
  • Revenue recognition
  • The role of the engagement quality control reviewer

Whether a firm has oversight by the PCAOB or not, this report is beneficial for risk management of any firm performing audits today, explains  Violation of professional standards are a leading source of accounting firm professional liability claims.  Contact us to discuss ways to better protect your firm against lawsuits.




PCAOB Releases Report on Audit Deficiencies

On December 10th, the Public Company Accounting Oversight Board (PCAOB) released its report on the investigation of 309 integrated audit engagements.  The PCAOB describes the findings of deficiencies dealt primarily with a lack of auditors obtaining sufficient support to reach the audit opinion they did.  15% of the engagements assessed had this finding.

Internal risk management and accounting firm malpractice insurance go hand-in-hand, explains  It is important to make sure that the right insurance is in place for the type of work being performed.  Contact a broker to discuss your firm’s areas of practice and insurance needs.







CPA Convicted of $485M Fraud Scheme

Jorge Castillo and Minor Calvo were convicted of engaging in a scheme that allowed Provident Capital Indemnity Ltd. (PCI) to sell $485 million worth of bonds without proper backing.  Castillo, a New Jersey CPA, was engaged as the outside auditor of PCI during the years 2004 to 2010.  In reality, Castillo was creating the fictitious financials that he was supposed to be auditing.  He also attested that reinsurance backed the bonds – but it was discovered that it was never actually purchased by the company.  Castillo faces a $43M fine and 54 months in prison. explains that while illegal acts are not covered by accounting firm malpractice insurance, the defense of innocent partners and the firm might be.  It is important to make sure that the firm is covered by insurance that is adequate for the risk the firm faces.  Contact a broker to discuss your firm’s insurance position.

PCAOB Warns Against Weakening Audit Practices

In a speech given on December 3rd in Washington D.C., PCAOB Chairman James Doty expressed developments of the Board as well as insights into emerging practice concerns.  Doty laid out concerns in the findings related to audit practice within firms.  He also provided updates on many items the Board is currently working on.

A failed checklist, improper procedures or inexperienced staff can lead to many unintended outcomes, adds  It is important that internal risk management and professional liability insurance coverage tie together to provide the highest level of protection for an accounting firm.  Contact a broker today to discuss how to best structure your risk management transfer.

CPA Pleads Guilty for $1.8 Million stolen over Six Years

Jeffrey Travis, of Gross & Travis Ltd has plead guilty to having stolen $1.8 million in funds from clients.  Instead of going to the proper recipients, the funds were re-directed by Travis to bank accounts he controlled.  These accounts were later emptied by Travis and used for his personal use. explains that proper oversight of all employees and partners of a firm is vital to preventing fraud.  Even though criminal acts are not typically covered by insurance, innocent partners may receive some needed benefits.  Contact us today for a review of your insurance policies.