Most businesses and many individuals depend on their accountants for financial advice. Accounting firms and Certified Public Accountants (CPAs) provide financial services – where they advise on financial decisions, supervise balance statements and track the movement of funds.
Some of the common duties include handling transactions, creating budgets, computing taxes and managing profit/loss statements.
Clients heavily depend on these experts and trust them with all their sensitive information. The more responsibility an accounting firm has, the higher chance of errors. Errors in a client’s finance can lead to a large loss and lawsuits against the accountant.
Therefore, accounting firms and CPAs in Hong Kong must have insurance to protect their liability, client data and management staff. Hence the article will explain the top insurance accounting firms and accountants in Hong Kong need and why.
Top Insurance for Accounting Firms & CPAs
Professional Indemnity Insurance
Accountants in Hong Kong are liable for many duties and have a standard of service they must provide their clients. It is a profession that focuses on details, and every number must be correct and accurate. One mistake can lead to disastrous outcomes and affect the client and their finance.
Examples of accountant negligence include misrepresented statements, inaccurate financial advice, calculation errors, or missing forms. The accounting firm would still be liable if the mistake were due to client errors or miscommunication. Clients can take legal action if the negligence causes them financial or legal damage.
CPAs and accounting firms must purchase professional indemnity insurance to cover common accounting negligence. PI insurance will cover most claims that result from negligence and errors. The cover will reimburse legal defence, compensation and settlement costs to allow the firm to recover.
The insurance can be purchased by an accounting business, CPAs and auditors to cover their liability.
Cyber Insurance
CPAs and accounting firms are trusted with a huge amount of financial data. The financial information is typically stored electronically on accounting software. The data include client personal details, business statements and bank details. The data is sensitive, private and must be protected by the trusted accountant. However, nothing stored electronically is entirely safe or protected.
Accounting firms are always at high risk of cyber-attacks. Cybercriminals are using more innovative ways to hack financial servers. Some of the attacks include phishing, ransomware and even AI attacks where attackers pose as fake clients.
A data breach at an accounting firm in Hong Kong can affect many clients and businesses. Firms and individuals must purchase cyber insurance to protect their client’s information. The insurance will cover cyber experts’ advice, ransom payments, threat removal, data recovery, informing third parties and financial loss.
The insurance is the additional protection to protect the client’s financial details and the accountant’s liability.
Director & Officer Insurance
The organisational structure of an accounting firm consists of CEOs, partners, managers, associates and junior accountants. The management staff is responsible for the company and the duties that occur in the company. They are liable to make decisions and take actions to benefit the firm.
However, there are occasions wrong decisions, misuse of funds, miscommunication, or breach of fiduciary duty can lead to lawsuits against the management and company. If a shareholder, board member or investor feels a manager has misused their power, they can sue the manager and the business.
Even if the breach of accidental, the managers will still be liable for the loss and negative impact on the firm.
Hence accounting firms should purchase director and officer insurance to protect their management team. D&O policies protect directors and officers of the insured organisation in the event of claims arising from their own decisions and actions in their roles.
Public Liability Insurance
Meeting clients is one of the main parts of an accountant’s job role. Meetings can be held at accounting firm offices or outside in public spots. When meeting clients and hosting a meeting in the office, it can be followed by risks.
These are public liability risks, which can be due to third-party injuries or property damage. These accidents can include clients tripping in the office, an employee accidently spilling a drink on a client’s laptop and many more. The affected party can sue the business for damage due to the business activities.
These risks can occur at any point and to any accounting firm or CPA in Hong Kong. Hence, they must purchase public liability insurance. The insurance covers the cost of claims made by third parties for the incidents that occur in connection with business activities. Public liability insurance will protect the Hong Kong firm in case of sudden third-party claims.
Benefits Of Insurance for Accounting Firms & CPAs
Handling clients’ finances is a complex job, especially when a firm deals with various clients in different industries. Accounting firms and professionals should have some or all of the above insurance. Each insurance protects against unpredictable circumstances that can cause significant financial and reputation loss.
The right insurance is the best risk management and financial protection for firms and freelancers. The combination of insurance will cover different risks and costs related to claims or cyber-attacks.
Additionally, by having these insurances, accountants and accounting firms can have peace of mind, knowing that the policy protects them from any unforeseen claims that may occur in the future.
To Learn More about accounting insurance and protect your accounting firm in Hong Kong & Asia, contact Red Asia Insurance.
