How to avoid risks and meet complex client needs
At a glance
Accounting is a complex profession that involves in-depth knowledge on a wide range of topics and the ability to stay across constant changes in the industry.
Although clients may come to accountants expecting them to have all the answers, there is no one accountant who does.
Drew Fenton CPA, managing director at Melbourne-based insurance advisory firm Fenton Green, says, “When there is a downturn in the economy, we see more professional indemnity claims, maybe because clients are not as profitable, and if something goes wrong, they seek compensation.”
“However, we would suggest that 40 per cent of claims are practitioners giving advice beyond their skillset to assist their clients,” he says.
Know your skillset
Being self-aware is an important skill for any accountant.
“You should know what areas of accounting you are knowledgeable in and your level of experience. This means that you are prepared for all the risks and have measures to control them,” says Fenton.
Many accountants are experts in tax and hold a tax agent’s licence, but that doesn’t automatically mean that they’re qualified to give specific directions to every client in every situation.
“For any accounting practice, clients can vary greatly,” says Fenton, “If we look at the tax act, there are many taxes that are very complex – for example, capital gains tax. For all specific sections of tax accounting, we suggest tax practitioners seek assistance.”
Avoid risks and consequences
Stepping outside one’s area of expertise can have serious negative consequences for accountants and their clients.
“We have seen significant claims coming from software companies as a result of the government trying to incentivise companies to create software in Australia,” Fenton says.
“Some general practitioners thought they could submit the claims themselves, and it took a long time for the tax department to do an audit for those submissions. When they did, they found errors. As a result, the client had to give back the funds they had claimed,” he says.
Accountants can be faced with fines and penalties if they are found to be negligent, or if clients claim that their accountant had made an error which caused the company a serious financial loss.
Prepare for the future
Every accountant wants to be able to help their clients and answer their questions. Fenton recommends accountants listen to their clients’ goals and anticipate their future needs, evaluate how the client’s situation matches up with their own knowledge and take appropriate action.
“Pre-emptively go and set up a referral base for clients that require specialised skills and advice,” Fenton says.
He also recommends insurance protection that covers both clients and accountants.
“From an accounting perspective, if you hold yourself as an expert and get money for that, you are responsible for maintaining a professional indemnity insurance which should cover the amount of A$2 million,” he says.
