10 mistakes to make a liability situation worse

July 23, 2019 4:32 PM

Any accounting firm can experience an unhappy client, but not every unhappy client has a legitimate legal claim. Before trying to resolve a client issue or threat, consider these 10 factors from national accounting risk management firm, CPA Mutual, that can create — or worsen — liability. Plan ahead with these tips and proactively manage your potential liability.

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1. Admitting mistakes too quickly

In an effort to appease a client threatening a lawsuit, don’t assume the client is right or has all the facts. Responding too quickly with apologies can be hard to defend in court if things proceed that far.

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2. Neglecting to follow up

An unhappy client or threat can get worse if the firm delays in responding to voice messages or emails. Provide a concerned response by asking the client questions or saying that you will look into the matter.

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3. Asking the wrong questions

Without context or research on the issue, you won’t be prepared for an informed discussion that could get emotional. Avoid discussing the problem at length before you have consulted insurance and legal counsel about any potential liability.

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4. Assuming more liability than necessary

In some cases there may be liability to address, such as with errors or omissions. However, it is important to address the situation with your firm’s advisors before owning all responsibility, or more than is necessary. It may be that the client did not disclose certain things that led to the error.

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5. Reimbursing tax assessments or interest

In cases where a client receives a notice for unpaid taxes, for example, the taxes are still owed regardless of whether they are late or not. The CPA firm is not liable for tax assessments or interest. The firm may even help the client to get penalties waived if applicable.

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6. Going solo with a client threat

Too often, firm leaders are worried about alerting legal counsel or their professional liability insurance company for fear of additional costs or rate increases. However, those advisors are there to help the firm avoid even greater expenses.

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7. Failing to request complaints in writing

A best practice is to ask the client to provide detail or additional information in writing so that the threat or problem can be reviewed for a proper response. If the client refuses to provide written detail, ask if you can take notes and review any documents they have received. This interaction may also assist with a calmer conversation.

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8. Avoiding mediation

In between the fact-finding stage and a lawsuit, the parties involved can agree to mediation. If there is some liability discovered, it is often beneficial and less costly for both parties to engage in mediation and come to a settlement.

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9. Withholding key information from advisors

Firms should be transparent when discussing the nature of the threat or claim so their liability advisors can fully support them with a solution. A risk management process is only as good as the facts supporting it.

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10. Assuming a lawsuit is imminent

A client may threaten to sue, but it’s more likely that the person wants a solution, an apology and even a resolution that preserves the relationship. Assume the best before assuming the worst, and talk to your liability advisors as soon as possible.