Some clients will ask their CPA to assist them with the preparation of documents pertaining to the formation or liquidation of corporations, partnerships, estates, trusts, or other entities that require organizational documents. At other times clients will ask for help with documents pertaining to mergers, acquisitions, dissolutions, employment, severance, compensation, or stock option plans.

Professionals in the fields of law and accounting have long debated how much assistance a CPA should provide a client in this area. The pertinent laws differ by state and are constantly changing. From a risk management perspective, CPAs who help clients with legal forms and documents can inadvertently expand their liability exposures when they should be trying to limit exposures. Further, an effective legal defense may be hampered by the CPA helping a client with activity outside the typical CPA functions. On top of that concern is the issue of not being qualified or trained to spot potential legal problems.

CPAs should consult an attorney when a tax issue involves legal principles that extend beyond tax law, or when any other type of issue or engagement involves legal principles that need to be interpreted for clients. Avoid yielding to pressure from clients who are looking to cut legal expenses. The fee received by the CPA for some services is just not worth the exposure to potential litigation.

For more information and guidance about CPA firm insurance issues, call CAMICO at 1.800.652.1772.