Russell Shapiro and Mitchell Bryan, partners in the firm's Corporate & Securities Group, and Litigation Group, respectively, recently published their article, "Managing Professional Liability Litigation Against Accounting Firms (Part 1)," the first in a three-part series discussing the basic components of a professional liability lawsuit brought against an accounting firm and its partners, and the factors a firm’s managing partner should consider before and during this type of litigation for utilizing applicable insurance coverage, maximizing effectiveness of defense and, where possible, bringing the controversy to conclusion by settlement. Part 1 was published in the September 2013 edition of CPA Practice Management Forum and it focuses on the current litigation environment for accounting firms, relevant provisions in engagement letters, responding to subpoenas, professional liability insurance, and the risk of instigating a professional liability counterclaim in a fee-collection action.
From the article:
An unfortunate reality among accounting firm managing partners (MPs) is that at some point—if not more than once—while serving as MP, a client will sue one or more of your partners and the firm itself for professional malpractice. As primary leader of your firm, at first you will experience disbelief and denial that a client has blamed your partners and firm for a financial reporting error the client itself caused, mostly or entirely due to its own incorrect accounting entries, which normal and proper review procedures were not designed or intended to detect or correct. Once past the initial grief, anger, or both, as your firm’s leader, you will need to move forward by working with lawyers that you, your firm’s general counsel, or its professional liability insurer have selected to defend the claim, toward navigating the mater to resolution.
See the full article here.
This article is reprinted with the publisher’s permission from CPA PRACTICE MANAGEMENT FORUM.