For bookkeepers, workers’ compensation insurance costs roughly $30 per month, or $370 per year. Almost every state requires bookkeeping enterprises with employees to have this policy. It can assist pay for medical bills and missed wages due to work-related illnesses and injuries.
On Insureon’s workers’ compensation insurance cost analysis page, you can learn how premiums are calculated and more.
Can bookkeepers be held liable?
Bookkeeper responsibility may be a source of concern for some business owners. Whether you keep your own books or delegate that responsibility to an internal or outsourced bookkeeper, it’s important to understand the obligations that come with the job. After all, safeguarding your most precious assets your staff is vital to the success of your company.
Insufficient Funds
One reason a check may bounce is that the payer lacks a dedicated accountant to maintain track of his or her affairs. Vendors expect to receive their payments on schedule even in this situation. An authorized representative (i.e., one with check-signing authority) is personally liable to the payee unless the representative can prove that the firm did not intend for him or her to assume that duty, according to the Uniform Commercial Code.
What to look out for: To safeguard the bookkeeper from personal liability, need a second signature from a supervisor or corporate authority on each check.
Unpaid Payroll Taxes/Withholdings
One of the IRS’s hot button concerns is worker classification, and the agency is looking for red flags in business tax filings. Who is responsible for missed payroll taxes if a corporation asserts that employees are independent contractors but the IRS later reclassifies those workers as employees? Consider the following scenario: When a corporation is cash-strapped, it pays its vendors first before sending payroll tax withholdings to the IRS. Who is in charge of that decision?
The IRS might make bookkeepers personally accountable for 100% of any trust fund taxes (i.e., employees’ Social Security, Medicare, and withheld income taxes) in any situation if they:
- are “responsible parties” with decision-making authority (in other words, they decide which checks to send out as a check-signer), or
- Even if a business officer told them not to, they refused to pay the taxes.
What to look out for: If at all feasible, avoid designating bookkeepers as approved check signers and instead require checks to be signed by a supervisor or a corporate officer. You may not be able to argue that you have no decision-making authority or that you were unaware that taxes were owed if you are a business owner who does your own bookkeeping. Instead, shield yourself from personal liability by becoming familiar with the role’s dangers.
Data Breaches
Companies that outsource their bookkeeping should be aware of the hazards to their data security. If a security breach affects bookkeepers who store confidential customer information on their networks, the information could be exposed, corrupted, or lost. Breach reporting requirements and other fines for violating state and federal privacy and security standards may be triggered by these attacks.
What to look for: Make sure your bookkeeper has solid data security procedures in place, including a written policy for handling confidential information.
CRI Can Help With Bookkeeping Liability Hazards
Running a prosperous business includes keeping an eye out for anything that could jeopardize your most valuable assets, such as your and your employees’ personal finances. Please contact CRI to learn more about how our client accounting services can assist you in keeping your company on track.
Do bookkeepers get sued?
You may be held accountable for damages to victims of fraudulent bookkeeping practices in addition to face criminal prosecution. Investors are frequently the victims of bookkeeping fraud, and they may sue the company and you for misleading reporting. Investors may allege that if they had seen accurate financial accounts, they would not have invested in a company. If you willfully modify the facts of a financial transaction, you can be charged with conspiracy, racketeering, conflict of interest, and embezzlement in addition to concealment or misrepresentation of money.
How do I protect myself as a bookkeeper?
Countless headlines demonstrate what can happen when a company’s “trusted” bookkeeper is overworked. Embezzlement and theft can go undetected for decades, and the consequences can be disastrous, putting the company’s entire operation at danger. While it is hard to remove all internal and external fraud concerns, following best practices can considerably minimize risk within your firm.
Implementing a risk management program is the first step toward lowering your company’s fraud risk. Senior management must make it obvious that no sort of dishonesty will be allowed through their words and actions. Review your insurance coverage every year to make sure you’re protected against internal and external thefts, and make sure your accounting and/or bookkeeping firm is properly bonded. In addition, inquire about your accounting and/or bookkeeping firm’s employment methods to ensure that its employees are properly screened.
While successful firms cultivate a trusting environment, putting in place proper control systems can help you verify your employees’ behavior. Create a separation of roles by delegating business functions to more than one person or department to limit the risk of fraud and errors. Set up and approve new vendors, approve invoices to be paid, write checks/start electronic payments, approve new hires, approve and alter pay rates, process payroll, and reconcile bank and credit card accounts, for example.
All employees who work with a company’s books and records should be thoroughly screened. Check their employment, credit, residence, bankruptcy, and criminal and civil court records, as well as their criminal and civil court records. Because many bookkeepers who are caught in a fraud are not prosecuted, they move on to the next victim. A thorough background check will reveal if a potential employee is a high-risk or low-risk candidate.
It is much easier to spot unexpected spending or balance sheet concerns that are incurred as a result of bookkeeper fraud when you have financial transparency. As a result, it’s critical to reconcile your balance sheet and assess your financial results against your budget on a monthly basis. Make certain to:
- All cash receipts should be deposited into a business bank account. While it may appear to be more convenient to pay for petty cash with cash from the drawer, this method fosters an environment where money are easily misdirected.
- Examine all bank and credit card statements thoroughly. It is advised that business owners get unopened bank statements directly in the paper-based environment. Business owners can access bank records online on a regular basis and set up alerts to tell them of any large or unexpected transactions in the electronic world.
- Regularly get your books reviewed by a third-party accounting firm. A regular audit by an outside accounting firm can be a powerful deterrent to fraud.
- Use an accrual accounting system to keep track of your finances. Use the accrual basis of accounting to eliminate the variances that arise when using the cash basis of accounting (recording revenue when cash is received and expenses when checks are cut) (recording revenue when earned and expenses when incurred). This will assist you in identifying unexpected outcomes.
- Your balance sheet should be balanced once a month. While most business owners appreciate the necessity of reconciling their bank accounts on a monthly basis, reconciling all balance sheet accounts on a monthly basis is just as critical. Ascertain that the transactions on the balance sheet are appropriate, so that improper items within these balances do not obscure the income statement’s findings.
- Ensure that all books and records are stored safely. Whether you keep your records online or on paper, make sure to conclude each financial period and lock up documents so that previous transactions can’t be changed.
- Check stock should be eliminated or locked up. It is more difficult to destroy or hide vital documents when using electronic payment systems. If you’re going to use paper, make sure that all checks are accounted for by management.
Fraud is more common than most companies think. Not only can employing accounting best practices discourage an employee from committing fraud, but you will also gain a better understanding of your company’s finances.
What is bookkeeper insurance?
Businesses that provide revenue and expense monitoring services and keep general ledgers for their clients are covered by bookkeeper insurance. A circumstance like this could be covered by bookkeeper liability insurance: You’re doing the books for a client who is looking for a business loan.
What can a bookkeeper not do?
A Bookkeeper (who is not a registered agent) can process the system, but not in such a way that the client is’relying’ on the unregistered Bookkeeper to create, authorize, or evaluate it.
What is illegal bookkeeping?
In Florida, gaming is governed by Chapters 849, 550, and 551. Except for a few exceptions, such as charity bingo, the Florida State Lottery, pari-mutuel facilities, penny ante betting, and so on, gambling or being linked in any way with gambling is typically illegal.
In Florida, bookmaking is prohibited. The term “bookmaker” is misleading. Making books is not against the law, but receiving bets on agreed-upon odds is. A bookmaker, often known as a “bookie” or “turf accountant,” takes individual bets and then pays out or collects money according on what his book says about who owes whom how much money. A bookmaker keeps track of all the bets in his book, which is why he is called a bookmaker.
What are the financial transactions for which a bookkeeper can be responsible?
A bookkeeper is in charge of keeping track of a company’s financial transactions, such as purchases, expenses, and sales revenue. The phrases sales, invoices, and payments are all used in accounting. Financial data will be entered into general ledgers, which will be utilized to create the balance sheet.
Do accountants get sued a lot?
Even if the accountant has done an excellent job, the CPA might expect to be sued if fraud is detected at a client’s business. “They have to get ready,” Summerford stated. “They’re going to face legal action.” When we go in and find out that there has been a fraud, the accountants are sued. Then we look at the work documents, and we see that they skipped a lot of processes that they should have completed and didn’t adhere to their own audit protocols. One of the most terrible things that may happen to a CPA throughout their professional career is when they are sued for malpractice. It doesn’t happen to many people, but it does. It’s a question of their credibility, their ethics, and their ability. Their client, with whom they thought they had a great connection, turns on them and files a lawsuit.”
Even if the CPA or their firm has liability insurance, it is possible that they are not adequately insured. Summerford encouraged delegates at an ACFE conference workshop on the opportunities and hazards in accounting malpractice cases not to rely on the liability insurer’s attorney if they are sued for malpractice, but to hire their own attorneys who will look out for their best interests.
“If you interview anyone who has been involved in an accounting malpractice lawsuit, they will tell you that if it happens again, they will employ their own counsel to represent them,” he said. “That isn’t to imply that the defense attorney hired by the insurance company isn’t good and capable of doing the job; however, they may have a conflict, which they can avoid by having their own attorney provide counsel.”
Many accountants who are sued for malpractice are unaware that the defense counsel represents the insurance company, according to Summerford. “Accountants don’t approve bills, they usually have no idea what’s being charged, and they have no idea how many motions are going on.” Accountants need to wake up, and if they are involved in an accounting malpractice case, they should hire their own attorney to advocate their interests and seek legal advice. Their legal counsel will be able to collaborate with the insurance company’s legal counsel.”
Accounting businesses are a tempting target for malpractice lawsuits. Summerford explained, “When lawyers bring a lawsuit, they will aim for the deep coffers, where they can achieve a settlement for the plaintiff client.” “Accountants are a natural because they have insurance, usually a lot of it, more than their net worth, and they want to settle matters.” They don’t want it to become a viral video. They don’t want it to be available to the public. One of the biggest defenses for accountants is that it is not their responsibility to police and work for their clients. Your client has obligations that they haven’t met.”
Summerford has seen accountants seek advice from bankruptcy attorneys after being sued for malpractice in a few cases, but he hasn’t seen any accountants close their practices as a result of a lawsuit. “Because of the personal liability that they attach,” he continued, “they’ve considered filing personal bankruptcy.” “Thank god for the legislation stating that the cash values of retirement plans and insurance policies are not subject to creditor claims.” They won’t be able to get them into bankruptcy, but they will be able to get a house. I couldn’t afford malpractice insurance when I first started my practice in 1992. I started transferring any assets I had to try to make myself judgment-proof because I couldn’t afford to lose my home if I was sued for malpractice.”
If they are sued, it is in the accountant’s best advantage to conclude the case as fast as possible because legal fees and irritation can quickly add up. When defense counsel hires Summerford’s firm, the first thing it does is look at the case to see if there is a credible malpractice claim.
“We’ve told defense counsel a number of times that you need to settle this matter. In my judgment, your client will be found guilty of malpractice.’ ‘No, we think you have a very excellent, genuine defense, and we think you should go to the mat with them, because we think you have very good defenses and the accountants did a fantastic job,’ we’ve said in past cases. It has the potential to go either way.”
When matters go to arbitration rather than a jury, accountants are more likely to win. By appealing to their emotions and focusing on non-accounting problems, such as putting themselves in the shoes of a struggling business owner, plaintiffs’ counsel might generate sympathy from jury members who are unfamiliar with accounting rules and regulations. When an attorney can establish that they have been paid by the client, it is similarly difficult for CPAs to persuade a jury that they are independent. In arbitration, the dispute is typically heard by a three-person panel of specialists who are more knowledgeable about accounting rules.
“Then it’ll be cerebral,” Summerford added, referring to the accounting laws and regulations and what they did. “I’ve seen accountants fare considerably better in arbitrations than they do with a jury.” They’ll be murdered in front of a jury.”
Why do accountants get sued?
Now, let’s look at three reasons why accountants are sued. While this is from a professional indemnity insurance agency in the United States, the reasons stated are universal and applicable to Ireland.
Accountants, in my experience, get sued for bad financial advice.
Not because the advice was bad, but because the accountant failed to complete the risk management steps and document the advise, resulting in a razor-thin claim when none should have existed.
The other reason, in my experience, is that a corporation defrauded investors, and the accountant is being sued by the investors for failing to uncover the wrongdoing during an audit. That isn’t the point of auditing, but it isn’t the goal.
Claims against accountants, on the other hand, are rarely heard in open court.
The attitude of compromise stems from accountants’ dislike of court hearings and the power that their deep knowledge of their clients’ financial issues provides.
- A sudden shift in your client’s financial circumstances. Fraud, losses, a poor acquisition or agreement all of these factors have the potential to derail the client-accountant relationship. How can you avoid a sour relationship with your clients? Every commercial agreement should be documented in writing.
- Client attorneys will attempt to sue everyone. Assume your client is the victim of fraud. Your client’s lawyers will almost certainly advise them to sue their accountant. Accountants are frequently criticized for fraud, whether right or not.
- You can be sued by third parties, lenders, and others. Did you aware that third parties file 30 percent of accounting lawsuits? If a client defaults on their payments, their creditors, shareholders, and business partners may initiate a lawsuit against you to recoup their losses.
Should your bookkeeper have access to your bank account?
Through Wells Fargo’s Account Access Manager, you can grant an accountant or bookkeeper View Only access to your bank account.
Navigate to the small business portion of the Wells Fargo website. Select it from there “Account Access Control.” You’ll see a list of all the employees you’ve added to your account. You can remove authorized signers and grant individuals online access “Access to one or more accounts with “View Only” privileges.
Wells Fargo advises that you check who has access to your account on a regular basis and make changes as needed to meet your current needs.