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Shielding your accounting firm: Buying liability insurance

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2 years ago

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Today’s market for professional liability insurance is similar to markets in other industries in that it reflects the changes that the profession is undergoing. As the profession evolves, so does the market. 

“As the CPA profession evolves and new services are offered, it makes for different risks,” explained Candace Coach, small firms sales manager at Aon, the manager for the AICPA Professional Liability Insurance program. 

Among the factors to consider when shopping for a policy, she advises the prospective purchaser to consider whether the insurance carrier has the financial stability to take on the risk. 

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“For some carriers, the risk is too large, leading them to exit the market,” she said. “For example, we haven’t seen any claims yet for the beneficial ownership filing requirements, but it could result in large claims down the road. We are one of the only carriers that offer coverage for this; however some CPA firms will go ahead and offer these services and assume they are covered.” 

Coach anticipates that claims will be coming in as a result of firms offering services for BOI filing. 

“We don’t know what the claims will look like, but there are specific guidelines that have to be followed, which could result in exorbitant fines assessed against the filer. Clients will be looking to the CPA to pick up the fee or the fine. As far as the market is concerned, some carriers will feel as though it is best for them to non-renew certain policies, and exit the market altogether and downsize to less risky professional services.”

Prospective buyers should look for “premium modifiers” that can lower the cost of a policy. These include claims-free history, continuing education, and various types of “best practices.”

The liability market is softening up a little, according to Stephen Vono, senior vice president at McGowanPro. 

“It’s still somewhat of a hard market in large metropolitan areas,” he said. “A hard market is when there is a lot of claim activity and premiums go up. In a soft market there is less claim activity and premiums go down. It depends on the kind of services that are offered. Cyber is a little on the hard side, but it is beginning to see some softening because insurers have become better at underwriting guidelines in the last few years.”

“You should look for a carrier with an AM Best rating of ‘A’ or better,” said John Raspante, CPA, senior risk manager at McGowanPro. “It’s also best to get a carrier that has been in the space for at least five years. If they’re in it for five years or more, they’re familiar with the types of claims, policy limits, and other factors that might affect the decision.”

“In pricing a policy, they look at a number of factors,” he explained. “These include total revenue, loss history, number of staff, and areas of practice. Always look at ‘outside the policy’ options. If you have a million-dollar policy, legal expenses can exceed that very quickly, so it might be a good idea to get an extra million  just for legal and defense costs. A traditional policy is inside the limit. If you have a $1 million policy, $250,000 in legal fees will reduce the limit to $750,000. So I recommend an outside-the-limit policy to cover legal and defense expenses, to preserve the underlying $1 million. It does cost more, but I recommend a buyer to go for the outside-the-limit addition if the difference in premium is not significant.” 

Although it may not be particularly entertaining, it is important to actually read the policy, Raspante urged. 

“You need to read the policy, especially the endorsements,” he said. “They either weaken or toughen the policy. If it says that in addition to the underlying coverage it will also apply to employment practice, that increases the insurer’s exposure. It may throw in a sublimit for nonprofessional liability exposure that doesn’t cover the full limit — that’s why you need to read the whole policy. When you get close to the end it looks like a lot of legalese, but you have to read the entire document. For example, on the last page there might be a service exclusion for international work, which means that anything outside the U.S. is not covered.”

The panel of experts put together by McGowanPro’s Vono, which includes underwriter Gary Sutherland, Anthony Carolei, the risk manager for Hanover Insurance, and CPA defense attorney Ralph Picardi, recommends the following factors to consider when assessing liability policies:

  • Make sure the professional services definition is as broad as possible.
  • Does the broker or insurance company understand what you do?
  • Consider if your limits are sufficient, as legal defense costs are going up.
  • Is your deductible appropriate? If you have a large deductible, will you struggle to pay that deductible in the event of a claim?
  • Does the broker or insurance company provide supportive risk management services and education? 
  • Do not rely on your professional liability insurance policy to be the coverage for all your exposure. There are exposures that are better covered on a separate standalone insurance policy.  Separate directors & officers liability insurance and separate cyber liability, employment practices liability, commercial crime, and fiduciary liability policies should be considered to cover all exposures for your firm.

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Accounting

SEC’s Semiannual Reporting Proposal Faces Investor Pushback: What CFOs Need to Know

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1 week ago

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August 25, 2026

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U.S. Securities and Exchange Commission (SEC)

A proposal from the U.S. Securities and Exchange Commission to potentially shift some public companies away from quarterly financial reporting toward a semiannual model is drawing significant pushback from investors, even as it continues moving through the regulatory process. The debate has direct implications for corporate finance teams, auditors, and the broader transparency of U.S. capital markets.

What the SEC Proposed

According to a summary published by accounting advisory firm Cohen & Co., the SEC issued a proposed rule on May 19, 2026, aimed at simplifying financial reporting requirements for many U.S. public companies. The proposal would potentially reduce the frequency of certain mandatory disclosures from quarterly to semiannual, a structural change that has not been made to core U.S. reporting requirements in decades.

The proposal follows an extended debate within U.S. policy circles, with proponents arguing that reduced reporting frequency could lower compliance costs and free up management time for longer-term strategic planning rather than quarter-to-quarter results management.

Why Investors Are Pushing Back

Comment letters submitted in response to the proposal have been extensive, and according to Cohen & Co.’s review of the public record, investors “appear to be largely opposed” to the shift, viewing frequent interim reporting as a core benefit of U.S. capital markets relative to other jurisdictions.

Accounting and law firms have taken a more measured position, generally urging any changes to remain aligned with the Financial Accounting Standards Board (FASB), whose existing disclosure requirements and guidance are built around a quarterly reporting cadence. A shift to semiannual reporting without corresponding changes to FASB guidance could create friction between SEC filing requirements and GAAP-based disclosure expectations.

Lessons From the U.K. Experience

The debate is not without precedent. The United Kingdom moved away from mandatory quarterly reporting for listed companies in 2014, returning to a semiannual disclosure requirement. According to Cohen & Co.’s analysis, that experience offers a cautionary data point: there was no measurable increase in capital expenditure or R&D investment following the change, while analyst coverage of affected companies declined as reliable interim information became less available — a particular risk for smaller and newly public companies that rely on analyst coverage to maintain investor visibility.

Practical Implications for Finance Teams

Beyond the debate over disclosure philosophy, the proposal carries practical complications. Many companies have debt covenants and credit agreements structured around quarterly financial delivery; a shift to semiannual reporting could require renegotiating those terms. Reduced reporting frequency would also extend the “window of market silence” between disclosures, a factor that governance and investor-relations teams would need to manage carefully to avoid information asymmetry.

Separately, and unrelated to the reporting-frequency debate, the SEC and FASB have continued finalizing more routine updates this year. New Accounting Standards Updates are taking effect for December 31, 2026, fiscal year-ends covering income tax disclosures, credit loss measurement, induced debt conversions, and stock compensation, according to Eide Bailly’s review of 2026 ASU activity. Additional guidance on paid-in-kind dividends and environmental credits is also on the near-term horizon.

What to Watch Next

The semiannual reporting proposal remains in the comment and review phase, and no final rule has been adopted as of this writing. Finance leaders should monitor the SEC’s regulatory agenda for further movement, while treating the current quarterly reporting requirement as the operative standard until any final rule is issued and an effective date is set.

Given the extent of investor opposition documented in the comment file, a full shift to mandatory semiannual reporting appears more likely to result in either a scaled-back compromise or continued study rather than swift adoption — though the SEC’s ultimate direction remains uncertain.

 

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Accounting

AI-Driven Automation and Continuous Accounting Frameworks

Published

3 weeks ago

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August 15, 2026

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The accounting profession is undergoing a fundamental structural transition as enterprise finance departments shift from periodic month-end closes toward automated continuous accounting models. By integrating specialized machine learning algorithms directly into enterprise resource planning (ERP) platforms, chief accounting officers are transforming financial reporting from a retrospective exercise into a real-time operational asset.

The Shift from Periodic Close to Continuous Financial Reporting
Traditional accounting workflows heavily relied on manual data reconciliation, spreadsheet calculations, and multi-week closing cycles at the end of each fiscal period. In contrast, continuous accounting frameworks utilize automated software agents to process, validate, and post transactional data in real time as business activities occur.

Automated bank reconciliation tools cross-reference incoming bank feeds, invoice records, and purchase orders automatically. By resolving transactional variances instantly throughout the month, corporate accounting teams eliminate the traditional workload spikes associated with quarterly and annual closes.

Machine Learning in Audit Trails and Anomaly Detection
Advanced natural language processing (NLP) and machine learning tools are redefining internal audit and financial control environments. Automated systems analyze 100% of general ledger entries, identifying anomalous transactions, duplicate payments, and unauthorized journal entries in real time.

Rather than relying on random statistical sampling, corporate internal auditors can focus their attention on high-risk flags automatically surfaced by algorithmic monitoring platforms. This continuous risk assessment strengthens internal controls over financial reporting (ICFR) and significantly reduces fraud risk.

Evolving Roles for Accounting Professionals
As routine data entry and manual reconciliation tasks become fully automated, the skill set required for accounting professionals is shifting toward data analysis, system design, and strategic business advisory.
– Systems Governance: Accountants are increasingly responsible for monitoring algorithmic accuracy and managing data integration pipelines.
– Business Partnership: Finance professionals leverage real-time financial dashboards to advise operational leaders on margin management and working capital allocation.
– Regulatory Compliance Management: Accounting teams utilize automated platforms to ensure compliance with dynamic tax codes and international accounting standards.

Core Implementation Recommendations
1. Deploy Automated Reconciliation Tools: Integrate continuous transaction processing modules into existing enterprise ERP architectures.
2. Establish Algorithmic Governance Controls: Implement strict internal testing protocols to ensure automated accounting rules comply with GAAP/IFRS standards.
3. Reskill Accounting Teams: Invest in training finance staff on data analytics, workflow automation, and predictive financial modeling.

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Accounting

Global ESG Reporting Standards and Double Materiality Compliance

Published

4 weeks ago

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August 9, 2026

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Corporate accounting departments face expanding reporting expectations as international sustainability disclosure standards achieve regulatory enforcement across major global jurisdictions. Chief Accounting Officers (CAOs) and corporate controllers are establishing rigorous internal accounting controls to treat Environmental, Social, and Governance (ESG) metrics with the same data precision, auditability, and governance as traditional financial statements.

Regulatory Harmonization Under Global Sustainability Frameworks
The implementation of standardized sustainability reporting frameworks—notably rules established by international sustainability accounting boards—has created unified expectations for public and large private enterprises. Corporations must report standardized metrics covering greenhouse gas emissions (Scope 1, 2, and material Scope 3), energy utilization, workforce demographics, and supply chain governance.

In Europe and other participating international jurisdictions, double materiality principles are mandatory. Under double materiality, organizations must report both how external sustainability risks impact corporate financial performance, and how internal corporate operations affect surrounding environmental and social structures.

Integrating Sustainability Metrics into Core ERP Systems
To provide auditable non-financial data, enterprise organizations are integrating specialized carbon accounting and ESG management platforms directly into core ERP systems. Automated data collectors capture energy utility invoices, logistics fuel consumption metrics, and vendor compliance records in real time.

Establishing automated, traceable data pipelines ensures that non-financial reporting is supported by clear audit trails. This structured approach allows external financial auditors to provide reasonable assurance on sustainability disclosures during annual corporate reporting cycles.

Financial Impacts and Capital Market Disclosure
Accurate ESG reporting directly influences corporate cost of capital and institutional credit ratings. Commercial lenders and institutional asset managers systematically incorporate sustainability metrics into risk pricing models. Companies that demonstrate transparent, verifiable progress in operational energy efficiency and climate risk mitigation benefit from expanded access to green bond markets and lower debt pricing.

Action Steps for Accounting Leadership
1. Implement Double Materiality Frameworks: Conduct comprehensive assessments to identify material financial and operational sustainability metrics.
2. Build Auditable Non-Financial Data Pipelines: Automate ESG data collection within core accounting software to ensure data integrity.
3. Align Sustainability with Annual Financial Filings: Prepare non-financial disclosures concurrently with financial statements to satisfy regulatory audit expectations.

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