ACCOUNTANTS AND AUDITORS PI INSURANCE
An accountancy practice is assessed by its work mix, not simply its designation.
Audit, assurance, tax, accounting, payroll, company secretarial, valuation, business-rescue, forensic and advisory services each create a different professional reliance exposure. Professional indemnity insurance should be considered against the work actually performed, the engagement terms, professional status and controls in the practice.
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THE DECISION
Map the service mix before considering the limit.
A focused PI review starts with the income split by activity, the entities performing the work, professional principals, client concentration, engagement letters, subcontractors, client-money arrangements, claims history and changes in the practice. This gives an insurer a clearer basis for considering the risk.
The activities in an accountancy practice can differ substantially
A single firm may combine statutory audit or assurance work with tax compliance, bookkeeping, payroll, company secretarial work, management advice, valuations, mergers and acquisitions, insolvency, business rescue, forensic services or financial-services work. A liability allegation can arise from any of these activities, and the policy description needs to reflect the full declared service mix.
The dedicated underwriting information distinguishes these activities because they carry different reliance, financial-loss and control profiles.
Activities that should be separately identified:
- Audit, assurance, B-BBEE and independent-review work
- Tax compliance, administration and consulting
- Accounting, bookkeeping, payroll and company secretarial work
- Management advice, valuations, mergers and acquisitions
- Trusteeship, executorship, insolvency and business rescue
- Forensic investigations and financial-services work
When is PI required?
There is no single blanket rule that makes the same commercial PI policy a statutory requirement for every accountant and auditor. The applicable requirement can arise from the professional role, regulator, professional-body membership, audit-registration status, tender, client contract or engagement terms.
The practice should confirm the current requirements that apply to its own registrations and services. The insurance conversation should then test whether the actual policy responds to that requirement and to the wider civil-liability exposure.
Engagement terms, subcontractors and client money
For non-attest work, written engagement letters and appropriately drafted liability limitations can be important controls. They should be used consistently and be reviewed against the work accepted. A practice should also identify subcontractors, work performed in another firm's name and work undertaken by another party in its own name.
Where client money, money-market facilities, online banking access or other financial controls are involved, the exposure may extend beyond professional negligence. Segregation of duties, reconciliations, payment authority and fidelity arrangements become relevant alongside PI.
Claims-made continuity and historic entities
Accountants and auditors can face allegations years after an opinion, return, report, valuation or advice was issued. Claims-made cover, retroactive dates, prior claims, known circumstances and continuity need to be reviewed when a practice changes insurer, reorganises, acquires work or creates an additional service entity.
The policy should identify the entities and persons intended to be insured. A new entity is not necessarily covered automatically.
Read the general professional indemnity guide →
COMMON QUESTIONS
Accountants and auditors PI questions, answered clearly.
Do all accountants and auditors need the same PI cover?
No. The relevant requirements and liability exposure depend on professional status, services, registrations, client contracts and the work performed. A practice that combines audit, tax, advisory and financial-services work should not be assessed as though it performs only one service.
What services should be disclosed for PI insurance?
All professional services should be described accurately, including audit, assurance, tax, accounting, payroll, secretarial work, valuations, business rescue, forensic work, financial-services activity and any other advisory service.
Why do engagement letters matter?
They record scope, client responsibilities, reliance and liability limitations. They do not remove the possibility of a claim, but they can be important evidence and risk controls.
Does PI cover employee theft or client-money loss?
Not necessarily. Theft, fraud, client-money and payment-control losses can require fidelity or crime cover. The policy wording and the circumstances determine the actual response.
What does claims-made mean for accountants and auditors?
It commonly means the policy in force when a claim or circumstance is first made and notified is relevant, subject to its wording. Prior work, retroactive dates and continuity must therefore be reviewed.
Should a new service company be disclosed?
Yes. The entities providing professional services and intended to be insured should be identified. A new entity is not automatically insured unless the policy process confirms it.
Can a practice review its current PI programme?
Yes. The review can compare the service mix, income, principals, client concentration, contracts, controls, claims, historic entities and planned changes with the current policy.
