the issue but are examining it to determine
their position.”
The issue of data loss is becoming com-
monplace, according to Sutherland.
“We’re seeing it on a weekly basis with po-
tential claims coming in as a result of stolen
laptops, security breaches, and the like. It can
result in significant costs to accounting firms
just to notify current and past clients when
something like this happens. In one case, they
set up a phone line to answer questions 24/7.
It’s an interesting dynamic, because the last
thing you want is to send out a letter to 3,000
people that they may be victims of a security
breach because of you.”
Client identity theft continues to be a huge
issue, according to Rickard Jorgensen, chief
executive of Ridgewood, N.J.-based Jorgensen
& Co.’s CPA Gold.
“Many insurers offer endorsements to pro-
Insurance
From page 1
or add electronic media coverage and identity
theft for our member clients to cover a data
breach.”
WORST PRACTICES
Top five ways Cpas can get used
THE MADOFF EFFECT
Thompson noted that the poor economy
should be a caution flag to accountants. “They
don’t want to become a cheerleader for clients
with financial problems, especially when their
client may be renegotiating with banks for ad-
ditional funds. They should be more ready to
use going-concern opinions [a statement ex-
pressing doubt as to the ability of a company
to continue as a going concern], especially on
audit and review engagements.”
“Personal financial planning services con-
tinue to be problematic following the Madoff
situation,” Jorgensen said. “There have been
claims against CPAs for recommending an
investment advisor that represented Madoff,
But the economy does
generate malpractice
suits against accountants,
An area of concern for Kim Stone-Vilim,
underwriting manager for Geneva, Ill.-based
Insight Insurance Services, is the regulation
of tax preparers.
“This could have a huge impact on account-
No. 1: Suing the client for fees.
No. 2: Advising both parties to a transaction, or helping them to resolve a dispute.
No. 3: Participating in business deals with clients.
No. 4: Failing to communicate with clients in writing.
No. 5: Mistaking adherence to the professional standards as a substitute for
“getting it right.” Source: CAMICO Mutual Insurance Co.
ing firms,” she said. “The new regulations, as
currently proposed, would require all firm per-
sonnel that do any type of ‘substantial work’
on clients’ tax returns to register with the IRS
and pass a test if they are not a CPA, EA or an
attorney. What constitutes substantial work
is quite broad. Those that don’t register and
pass the test, if required, would be in violation
of IRS regulations and therefore would not be
insurable.” AT
vide this coverage, which should arguably be
part of a standard policy,” he said. “However,
some insurers tie coverage to ‘professional
services,’ as opposed to the broader ‘legal li-
ability’ coverage. Semantics perhaps, but in
the hands of an insurance adjuster it could be
a possible reason for a denial of coverage. We
have seen several claims concerning theft of
laptops containing client personal informa-
tion, or laptops left on trains or in cars. We have
even seen CPA client information stolen via
dumpster diving.”
“On the topic of electronic fraud, we have
also seen a variation on the 419 Scam, where
an accountant was duped into paying a ficti-
tious bill to a dummy foreign company on be-
half of a client,” he said. “There are bad people
out there.”
Bill Thompson, president of Alachua, Fla.-
based CPA Mutual Insurance Co. of America,
agreed. “The accountant definitely needs to be
aware of data security,” he said. “We changed
our policy a couple of years ago to incorporate
