A recent claims study conducted by Camico Mutual Insurance Co. indicated that more than half of all claims reported by Camico-insured CPAs come from tax engagements.
The study, conducted in October, included the claims experience of all of the insurer's nearly 7,000 policyholder firms in 44 states, focusing on the major causes and types of claims incurred by CPAs nationally. Tax was identified by the Camico survey as the most frequent type of claim, generating the largest total of claims dollars incurred, for two reasons -- the complex and continually evolving tax codes, and issues regarding the engagement between CPAs and their clients.
"The technical nature of this area of taxation places most of the burden for decision-making on the CPA," says vice president of claims Ron Klein, in a statement. "There is usually a limit to how much the CPA can ask the client to decide in technical tax issues."
Technical income tax issues are the primary area of loss according to the study. In addition, S&C corporation elections are the next most risky, followed by estate planning. Following taxation on the list of practice areas with the highest risk for liability claims were financial statements, investment fraud and defalcation (embezzlement).
Camico claims and loss prevention staff determined the areas of practice that are the most risky by examining selected claims data based on both frequency (number of occurrences) and severity (total dollar losses) from 1986 through 2004. More details on the study are available at www.camico.com/website/press_releases.asp#claimsstudy .
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