The disruption caused by Covid-19 is likely to result in a recession and, from past experience, we know that such a recession is likely to result in an increase in Professional Negligence claims. Individuals and businesses will try to recover losses which they may otherwise have written off.
As is the nature of the pandemic, changes to guidance and law are fast moving and if changes are missed , this is likely to lead to an increase in claims.
Furthermore the majority of professionals are now working from home or remotely as a result of the Covid-19 restrictions.
Some professionals will be experiencing an increasing number of new matters arising from the pandemic, increasing the pressure and stress, together with adapting to working from home. Others are experiencing a decrease in their workloads, providing them with the opportunity to take a more relaxed approach.
Without the formal office environment, together with the increased pressure or the relaxed attitude, it is easy to make mistakes or miss important deadlines.
The Covid-19 pandemic is unlikely to provide a professional with an excuse for failing to comply with his or her duties to their client or present a reasonable defence to a professional negligence claim.
It is crucial to have communication between all parties in the current situation.
The implications for accountant/auditors are that they face an increased risk of claims being made against them for a number of reasons including:
To minimise risk, the Financial Reporting Council (FRC) is recommending that, where possible, audits should be delayed or extended or further delayed or extended during this period. This may not be possible in view of the significant period restrictions that have already been in place. Should this not be possible, it is recommended that audit opinions in audit reports be modified to reflect the fact that audit procedures cannot be performed adequately or at all. In view of the significant economic and political uncertainty, it may be difficult to support judgement of management in relation to valuations or going concern, which may lead to the auditor issuing a qualified audit opinion.
Auditors seeking to qualify their audit reports can expect to come under significant resistance from directors concerned about the impact that such qualifications may have on their businesses, which may result in claims against auditors.
All professionals can do in these uncertain times is to put in place a clear risk strategy and stay up to date with changes in law and guidance throughout this period, in order to minimise exposure on future claims.
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