Accounting Firms Face Liability Insurance Crisis

On May 8, 2002, Andersen announced that approximately 2,000 of its people, including almost 200 partners, will join Deloitte & Touche immediately in many offices across the U.S. The next day in Los Angeles, Deloitte CEO James Copeland reportedly told the press that the insurers of major accounting firms are refusing to provide coverage.

Reuters reports that Mr. Copeland has called for the government to cap the liability of major accounting firms. He suggests that a cap of $100 to $200 million per case would help insurance companies calculate the degree of risk and how best to cover it. This would be similar to laws that already exist in Germany.

In the past, Mr. Copeland said, most insurance companies would provide coverage, but only for up to about $100 million in liability. After Andersen's recent $217 million settlement of claims related to the collapse of the Baptist Foundation of Arizona, this amount no longer seems sufficient. "Some level of accountability in the courts is good for us," he said. "But when you start talking about ... having billions of dollars in liability on a single audit ... it just doesn't make sense."

Separately, Reuters said Mr. Copeland faulted the current system of licensing and investigation into professional misconduct, which is typically handled at the state level. He said the level of fragmentation makes it difficult for firms that do business in more than one state. "While it's great to have state regulatory bodies, I wish they would be a little more uniform," Copeland said. "If you had a uniform set of regulations that were enforced by the states, that would be fine. It's the variation that creates problems."

-Rosemary Schlank

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Upcoming CPE Webinars

Apr 17
In this exciting presentation Excel expert David H. Ringstrom, CPA shares tricks that you can use with pivot tables every day. Remember, either you work Excel, or it works you!
Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.