Speak to any accountant in practice and it is clear that the insurance industry has made a right mess of professional indemnity insurance for the millennium bug.
Firms claim that it is possible to obtain appropriate cover, but, to quote one smaller practitioner, it has been ‘a hell of a game in getting it’. To satisfy the insurance company, his firm had to write to all clients – everybody from the biggest audit client down to the individual wanting some help with the self-assessment tax form – making it clear that as accountants and auditors they weren’t responsible for sorting out Y2K issues.
The administration has been a nightmare. But, perhaps more importantly, is the damage done to the client relationship. Accountants don’t like writing client letters which virtually say: ‘Hey, sunshine, we can’t help you. On this one you’re on your own’. Nor do clients much like receiving such correspondence. But getting cover is possible if you go about it the right way. The insurance industry has been sending out questionnaires.
There is a risk that many practitioners will have answered the questions honestly but incorrectly. In time, firms may receive a claim which they believe is covered, only to find insurers disclaiming responsibility based on incorrect completion of the questionnaire. Many of the problem questions ask for a straight yes or no when, in truth, a fuller answer is the only sensible option.
The most practical option in the short term is for firms to keep talking to their brokers for two reasons: first to obtain as much help as possible in filling in the questionnaire: and secondly, to ensure that brokers and insurers understand the Y2K problem from the auditors’ perspective.
This is another example of auditors having to be very careful not to be lumbered with a problem which is not of their making and has nothing to do with them.
But lumbered some of them may be.
Peter Williams is a chartered accountant and editor of Electronic Finance.
Just one half of UK practices have implemented a pricing structure around auto enrolment implementation and advice - with many suffering increased costs
Deloitte's north-west Europe foray; BDO, Smith & Williamson investment paths; Shelley Stock Hutter; and Wilkins Kennedy discussed by editor Kevin Reed on our Friday Afternoon Live broadcast
Accountants should alter their perspective on auto-enrolment to maximise business opportunities, according to Eric Clapton.
Kevin Reed discusses whether new accountancy group Cogital can rival the Big Four...and its likely direction of travel