Accountant’s Liability Insurance
Insurance is very vital to one’s life. Not only do persons acquire insurance to protect themselves in cases of accidents, illnesses, calamities, and similar situations; they also take insurance to guard them against liabilities. In case one individual is held liable for causing harm to others, such as physical and property injuries, he/she is deemed protected by the so called liability insurance.
Liability insurance is a form of insurance policy designed for the protection of a business entity or individual from risks of being held lawfully liable, and as well from being litigated for an offense, such as negligence, injury, fraud, or malpractice. Once one is proven to be legally liable, the legal costs and other legal expenses are the costs covered by liability insurance. However, contractual charges and intentional damages are circumstances not included to be covered in liability insurance coverage.
Businesses typically obtain liability insurance to cover them in case their employees are injured while performing the job. A manufacturing business is the one who regularly procures liability insurance for their products since faulty products is likely to be distributed to the consumers.
On the other hand, professionals, especially those who endeavor in the field of medicine such as doctors, nurses, surgeons, and medical technologists, also purchase liability insurance in the practice of their profession. Others are teachers, engineers, and accountants.
Accountants are professionals practicing accounting and auditing procedures. Their primary roles are to measure, disclose, or provide assurance regarding financial information in order to assist in the decision making for business managers, tax and other authorities, investors, and other stakeholders in the company’s allocation of resources.
Accountants operate in the field of commerce and industry. Accountants are typically employed in accounting firms. They can also work for large companies’ department of internal accounting. In addition, they could likewise venture into private individual practice.
The Generally Accepted Accounting Principles (GAAP) is the guiding principles and ethical standards that govern accountants. International Financial Reporting Standards (IFRS) are also significant guidelines. These standards vary for each state or region.
The legal liability of accountants while executing professional duties is called the Accountant’s Liability. This is why accountants are obliged to be erudite and employ the proper accounting standards that are applicable to a business, given that risks of being held legally liable for misstatements, non-compliance, or fraud are to be anticipated. The management, creditors, and investors from the examined company can file legal proceedings against the accountant who is found negligible while doing his/her examination of the company.
Accountants face burden in the existence of Accountant’s Liability. This is because fraud can be present in the company with the management’s intervention and the probability of non-detection subsists. And sometimes, accountants are held legally liable for misstatements or fraud he/she is not responsible. This paved the way for accountant’s liability insurance to transpire.
Accountant’s liability insurance is an insurance policy which provides coverage for accountants who are engrossed with lawsuits pertaining to his/her professional behavior. Damages and accompanying legal fees arising from the court case are covered by the accountant’s liability insurance.