Covering Professional Risks for CAs

Written By PracticeGuru dated: 15th Feb, 2021

2 Min Read

Recently there was a news that CA may be liable for short GST paid by his cllients. It is as per Section 122(1A) of CGST Act, 2017.

These are very strict provisions. Such new provisions make it essential for CAs to protect their interest. It takes years to build a practice but one small mistake can ruin everything for Professional like CA. It is not necessary that a CA should do some fraud but even an unintentional mistake can be very costly for him if a client or Institute takes action against him.

Read the following news article.

In cases like above, there may not any fault on part of CA and even then he may be liable for action by department. CA should insure himself against such cases.

Risks for CAs

In the professional journey, a Chartered Accountant may be liable for his errors of ommission or errors of commission. Claims can arise against finest of Chartered Accountants. In such cases he will need insurance to cover his

1. Legal Expenses,

2. Administrative Expenses and

3. Settlements or courts judgement.

Even if a CA performs his duties diligently , there are chances of wrong judgement which can lead to lawsuits.

Take an example, CA provides some consultancy services to his clients which goes wrong and client decides to file case against him, if in such cases CA loses the case, insurance company will pay the client on behalf of the CA. Along with it, insurance company also undertakes to pay legal costs of CAs.

Areas of Risks

There are many instances where the ICAI has taken action against members for misconduct. All these cases can be covered by Insurance.

There was this directive last week by ICAI where they have warned their members and students to not troll government on social media otherwise they will be liable for action by the Institute. ICAI and ICSI say it may result to harm and disrepute to the profession and institute.

Provisions of certain laws like GST are getting very strict.

There are suits, prosecutions, penalties against Auditors under sections 139, 140(2), 143, 144, 145 of Companies Act, 2013.

It is advisable for CA to take Professional indemnity against such risks.

Benefits of Indemonity Insurance

CAs can work peacefully and can focus on their work not being worried about undue cases against them for mistakes and omissions.

How much insurance is enough?

It depends upon the turnover of the practice amongst other things. The bigger the practice, more insurance must be taken.

Have you taken your indemnity insurance?

ICAI, CA institute provides such indemnity insurance at disocunted rate. New India has agreement with ICAI for providing insurance at discounted rate to members of ICAI. To know the benefits offered by ICAI, click here

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