Recession set to fuel legal action against accountants, insurance broker warns
Legal claims from clients over fraud and fees could increase Professional Indemnity premiums.
Litigation against accountants is likely to increase as economic conditions
deteriorate, a leading insurance broker has warned.
Any increase in legal claims against accountants could push up Professional
Indemnity insurance premiums paid by accountancy firms, Marsh added.
Troy Russell, a vice president in Marsh’s financial and professional
practice, said: ‘In 2008, the PI market for accountants and auditors continued
to soften and many firms received premium rate reductions.’
‘However, insurers are already taking a tougher position on rates for other
professions, such as the legal sector, where the market is already showing signs
of turning. It is likely that, due to current economic conditions, this trend
will also affect accountants and auditors when they come to renew their
insurance policies.’
Key legal and financial risks faced by accountants include agreeing a fair
valuation of a client’s assets, companies making legal claims when auditors fail
to uncover fraud within their company; and clients trying to pay a reduced fee,
according to Marsh.