The responsibility of a CPA can have far-reaching ramifications within the organization he or she works for. This is why CPA professional liability insurance is so important. Professional liability insurance protects a CPA against being sued or otherwise held financially responsible for mistakes they make on the job. These are some of the situations CPA professional liability insurance protects against.
Privity is another word for breach of contract. In other words, a CPA can be sued if they fail to perform the duties agreed upon in their contract with a client and the client suffers damages because of that.
Both clients and third parties who believed they suffered damages due to the actions of a CPA can bring a negligence suit. Negligence refers to the neglect of professional duty with the knowledge that harm to others could result because of it.
Fraud is the misrepresentation of fact by a person who is aware that he or she is being misleading. A CPA may commit fraud by misleading the client about its assets, or as a way of compounding other issues such as covering up negligence.
Statutory liability means that CPAs can be held accountable for legal fees or other costs incurred during a court case.
CPA professional liability insurance is important to help protect individual attorneys and the firms they represent against paying financial penalties that can sometimes be crushing.