By Joel Lanz, CPA/CGMA/CITP/CFF, CISM, CISSP, CFE
CPAs all share a common background. Each CPA must complete some type of education program that includes a minimum number of accounting credits; unfortunately, practice management issues are seldom included in these requirements. Although accounting professors teach their students how to use professional standards and related guidance to minimize their risks, lessons related to malpractice insurance are typically not included in curricula or syllabi. Had they been, Joseph Brunsman and Daniel Hudson’s True Course would have been required reading. It should certainly be of interest to any sole practitioner or partner in practice.
The book’s cover proclaims it as “the definitive guide for CPA practice insurance.” It is an easy-to-read-guide comprising 43 short chapters (usually under 10 pages) presented in eight sections, plus a reference section. Many readers will find dividing the book into four groups helpful in prioritizing which chapters to focus on.
The first group, comprising professional liability insurance, professional liability loss prevention, and employment practices liability insurance, addresses topics that readers may think they are already familiar with. Brunsman and Hudson provide the reader with education, detailed analysis, and general strategy recommendations for the purchaser of CPA malpractice insurance that will have many readers checking their policy details and phoning their representatives. For example, chapter 9, “Choosing a Deductible,” walks the reader through a series of considerations for choosing the best deductible for the practice. Chapter 10, “Renewing Your Professional Liability Policy,” provides a “countdown calendar” starting 75 days before the renewal date that shows how the practitioner should prepare, research, and review different types of proposals.
The second group of chapters describes how CPA firms can prevent or mitigate potential losses. Chapters 13–17 are devoted to providing practical risk reduction strategies, including how to avoid getting sued, protecting against fraud, and best practices to reduce claims, such as client acceptance due diligence. Chapters 18–22 focus on employment practices liabilities and will be a welcome tool for smaller practices who may not have engaged human resource professionals in the past to ensure compliance with complex laws and general advice on reducing risk in this challenging area.
The third group discusses unique challenges and situations; these include cyberinsurance, registered investment advisor insurance, excess insurance, and directors and officers insurance. The five chapters (23–27) devoted to cybersecurity not only provide excellent guidance to help CPA firms avoid becoming cyberbreach victims themselves, but an outstanding primer on the nuances of cyber-liability insurance policies. For example, chapter 25 highlights exclusions that many policyholders think they are covered for but may not be, including portable devices and the potential voiding of coverage due to failure to follow good security practices. With tax and investment advice the subject of many CPA lawsuits, chapters 28–33, on registered investment advisor insurance, will provide welcome advice for those practicing in this area. Chapter 30 discusses policy exclusions that may not be obvious, such as coverage for punitive damages.
CPAs are frequently asked to join a board of directors, whether as a compensated member of a for-profit enterprise or a volunteer for a not-for-profit organization. Chapters 39–41 provide thought-provoking questions for any CPA who receives such an offer. One practical suggestion is to obtain a copy of the organization’s directors and officers’ policy to ensure that it addresses the CPA’s needs.
The fourth and last section of the book provides additional information and references. The references take up 60 pages out of the 300-page book; some may believe that this is not useful, but this author finds them to be an important tool. Not only do the references provide support for the guidance contained in the book, but they are also a terrific source for readers to research additional information needed to assess the book’s recommendations prior to adopting them. Readers will appreciate that the references are presented in chapter order, allowing them to focus on the topics that are of most interest.
This author does have two suggestions for the authors if they are considering a second edition. First, there is a good deal of repetition of the warnings about using new entrants to the CPA malpractice market and their discounted pricing, especially in the early chapters. Secondly, a checklist summarizing the key issues discussed in the book would aid the appropriate due diligence that the book encourages readers to perform.
Overall, with a reasonable price, great advice, and an easy-to-use format that facilitates a quick focus on areas of interest, this book provides a high return on investment in both time and money. Every firm’s malpractice insurance decision maker should read, keep, and refer to it.
by Joel Lanz, CPA/CGMA/CITP/CFF, CISA, CISM, CISSP, CFE is the founder and principal of Joel Lanz, CPA, P.C., Jericho, N.Y. He is a member of The CPA Journal Editorial Advisory Board.