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Don’t Get Sued!

7 ways to protect yourself from your clients

Staying out of court Staying out of court

Hell hath no fury like a client with an aggressive lawyer, so accountants need to take some proactive steps to protect themselves and their firms against lawsuits.


David Lo Verso, vice president of underwriting for accountants’ and wealth advisors’ professional liability insurance at Jorgensen & Co., offers seven best practices – things to do and things not to do – to help safeguard yourself in this litigious age.

Bill frequently Bill frequently

The more often you collect, the less likely you are to need to sue a client for delinquent fees – and those kinds of suits often lead to countersuits from clients. "No one wants to collect unpaid fees, but if you do need to, go about it in a professional way," Lo Verso said. "Billing more often will allow your clients to understand the process of the professional engagement, and allow them to budget small payments."

Be ready to hit the target Be ready to hit the target

Make sure you are capable of delivering the services that the client demands. "Your clients expect you to be the most knowledgeable and up-to-date trained professional. After all, it's their money you are handling," Lo Verso said. "So stay on top of licensing requirements and the ever-changing revisions to state laws and statutes."

Update your engagement letters Update your engagement letters

As the engagement changes, document it in writing. "Over the years, the use of engagement letters has become more common and more of a requirement, rather than an option," Lo Verso explained. "By making sure each engagement is always documented with the proper services being provided, you can mitigate damage claims brought by disgruntled clients."

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Know your clients Know your clients

Exercise due diligence when it comes to prospective new clients before taking on the engagement. "There is a high percentage of 'failure to discover embezzlement or fraud' claims," Lo Verso noted. "These go across all scopes of engagements, but the largest exposure matters tend to arise from audit engagements for investment entities that turn out to be a Ponzi scheme or the like. It's easy to take on as many clients as you want; it is a business, after all."

Keep an eye on your independence Keep an eye on your independence

Don't let your judgment get clouded when performing services. "If you take on clients that happen to be friends outside of your professional relationship, do not allow yourself to succumb to the problems that come along with this," he explained. "Having a healthy separation of church and state will help you avoid actions that might suggest you are anything but independent from your client."

Don't speak too quickly Don't speak too quickly

Avoid giving out spontaneous advice. "It's easy to get wrapped up in a busy tax season and rush through a client's question. To avoid any misrepresentation, examine each question as if they were sophisticated enough to be a new engagement," he suggested. "If you find yourself giving quick information, document it after the fact, of what you conveyed to the client to avoid any confusion between the client and yourself."

Don't rush in Don't rush in

When it comes to new areas of practice, make sure you know what you're doing. "Audits of financial institutions and publicly traded companies are the standard for high-risk activities. Business consulting and managerial advisory services are the new norms for high exposure and liability. Declaring yourself an expert in a particular field of practice is risky, so always make sure you are qualified in what you are doing."

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