Negligence claims against accountants on the rise
March 30, 2010
Posted by:Sonita Ramkissoon
I have just read an article about the number of professional negligence claims being brought against accountants. Apparently the number of claims lodged in the High Court in the last year alone has exceeded the total number of claims brought in the previous four years put together. This is an astonishing increase!
It seems as if the recession is highlighting a lot of negligence which would not have come to light otherwise. This is due to the fact that in a buoyant market negligence may go unnoticed but the downturn has caused great losses to many parties, which in turn has led to examination of advice given , and action taken , by advisors. Where questionable advice or actions are uncovered claims are being made to recover losses. Claims relating to fraud or failure to spot fraud, over-valuation of assets, mis-selling of products and poor advice are on the rise.
The recession is certainly to blame for the increasing number of insolvent businesses. The liquidator of a company has to act in the creditors' best interests and if debts are substantial and there is a potential claim against an accountant which has good prospects of success then the risk of pursuing the litigation may be worth the benefits which could be reaped for the creditors. With the support of "no win - no fee" agreements and after the event insurance the risks to parties wishing to pursue claims of this nature are dramatically decreased.
The question is whether the rising tide of claims against accountants will continue unabated or whether it will ebb as the economy comes out of recession. We will have to wait and see...