Now here are 3 reasons why accountants get sued. While this comes from a professional indemnity insurance brokerage in the US, the reasons set out have global and Irish applicability.
In my experience accountant's get sued for investment advice that went wrong. Not because the advice was poor but rather the risk management steps and documenting the advice was not taken seriously by the accountant, resulting in a knife edge claim where none should exist.
The other basis in my experience is because fraud was perpetrated by a company on investors and the accountant is sued by the investors because of an apparent failure to unearth the fraud during audit. That's not the purpose of audit but that's not the point.
That said claims against accountants rarely get heard in open Court. The reasons being is that the spirit of compromise comes from accountants disdain of a Court trials and the leverage that their knowledge of their client's intimate financial affairs brings.
- Sudden change in your client's financial situation. Fraud, losses, an acquisition or deal gone sour — these things could suddenly ruin the client and accountant relationship. How do you prevent bad blood between you and your clients? It's important to document every business agreement in writing.
- Client lawyers will look to sue everyone. Say fraud is committed against your client. Your client's lawyers will likely say that they should look into suing their accountant. Right or wrong, accountants often get blamed for fraud.
- Third parties, lenders, and other people can sue you. Did you know that 30 percent of accounting lawsuits are filed by third parties? If a client goes bankrupt, their lenders, shareholders, and business partners could file a lawsuit against you seeking to recover their losses.