Top 5 claims made under ICAEW's PI insurance scheme

As we step into 2025, we take a look back at the trends and patterns in claims made under ICAEW’s professional indemnity scheme in 2024. Several common themes emerged that can serve as valuable lessons for members. Here, we explore the top five most prevalent accountancy negligence claims, providing insights that can help mitigate risks in the future.

Top 5 professional indemnity insurance claims made under ICAEW Members’ Scheme in 2024.

1. Tax-related claims

Throughout 2024, tax-related claims remained a prominent issue for accountants. Many of these claims stemmed from insufficient warnings about tax implications, incorrect advice regarding eligibility for reliefs, and missed opportunities for tax reliefs, particularly in areas like research and development (R&D). There were also cases where accountants got into difficulties because they had engaged in work outside of their expertise, especially relating to specialised tax issues (i.e. offshore tax matters; specialist trusts).

With the ever-changing landscape of tax regulations, accountants faced heightened risks related to tax compliance throughout 2024. Errors in tax returns, failure to advise clients on tax obligations, or misinterpretation of tax laws led to significant financial penalties for clients, resulting in claims against accountants.

Risk management advice:

• Engagement letters: Ensure that clear engagement letters are issued, outlining the scope of your services and what you are not responsible for. This clarity can help prevent misunderstandings.
• Document advice: Always record tax advice in writing, including any risk warnings provided to clients. It is also important to record and retain what information the client provided to you and therefore what your advice was based on. This documentation can be crucial in defending against claims.
• Stay updated: Stay up to date on tax legislation and undergo regular training and professional development to help navigate complexities and reduce the likelihood of claims. When it comes to areas of tax you don’t have experience or expertise in, tell your client and get specialist external tax advice.

2. Missed deadlines

Another significant source of claims in 2024 was the failure to meet filing deadlines for tax returns and accounts. Where a client relied on professional advice, HMRC are less likely to impose penalties for late submissions. The bigger claims come from interest on late submissions, which will always be charged by HMRC regardless of whether the error was caused by negligent professional advice.

Risk management advice:

• Implement reminders: Use digital tools to set reminders for important deadlines and regularly review your workload to ensure timely submissions.
• Client communication: Keep clients informed about upcoming deadlines and the importance of timely submissions. Document these communications to provide evidence of your diligence.

3. Audit claims

Audit claims, while historically less frequent, still posed a risk in 2024, particularly in light of recent corporate collapses. Claims often arose from failing to detect irregularities or incorrectly applying financial reporting standards. Accountants also continued to face claims for failing to identify and report on issues with material transactions during audits, with some notable cases in recent years involving large firms. There have been instances, particularly where novel reporting standards are involved, where auditors have received reprimands and fines for failing to document why a particular investigation has not been done or why the auditor has accepted the clients’ position on certain processes.

Risk management advice:

• Thorough documentation: Maintain comprehensive documentation of your audit processes and decisions - particularly when it comes to novel reporting standards. You must document why a particular investigation has not been done or why the auditor has accepted the clients’ position on certain processes. This can help defend against claims by demonstrating thorough due diligence.  
• Customise audit strategies: Based on each client’s unique circumstances.
• Clear engagement terms: Clearly outline the scope of audit services in engagement terms.
• Regular training: Stay updated on changes in auditing standards and practices through continuous professional development (CPD) to ensure your knowledge remains current.

4. Cybersecurity issues

The threat of cybercrime continued to escalate in 2024, with accountants increasingly targeted for sensitive client information. Claims arose from ransomware attacks and fraudulent transactions where clients were misled into transferring funds.

Risk management advice:

• Cybersecurity training: Invest in training for your team on cybersecurity best practices, including how to identify phishing attempts and secure client data.
• Verification processes: Establish strict protocols for verifying payment instructions, such as confirming details via a separate communication channel before processing transactions.

5. Inadequate client communication

A number of claims in 2024 stemmed from clients feeling inadequately advised about the risks associated with their financial decisions. Often these stemmed from misunderstandings about the scope of services or failure to inform clients of important developments. Disputes often arose over differing recollections of what advice was given.

Risk management advice:

• Written records: Always document key discussions and advice given to clients, whether through emails or meeting notes. This can help clarify what was communicated and protect against claims.
• Clear risk warnings: When advising clients on transactions, ensure that potential risks are clearly outlined in writing. This transparency can help manage client expectations and reduce the likelihood of disputes. 

What’s around the corner?

As we look ahead to 2025, several emerging risks and trends are worth noting for ICAEW members. The accountancy profession is increasingly influenced by technological advancements, regulatory changes, and evolving client expectations. Here are some key trends to watch:

1. Increased regulatory scrutiny

We can expect regulators to be keeping a closer watch on financial practices. This means accountants will need to be extra diligent about following the latest laws and regulations. Staying updated on changes, especially in areas like anti-money laundering and tax compliance, will be crucial.

2. Greater client expectations for advisory services

Clients are looking for more than just traditional accounting services these days; they want strategic advice that can help their businesses grow. Embracing a consultative approach and enhancing advisory skills will be crucial for accountants in 2025 to avoid potential negligence claims.

3. Remote work challenges

With remote work now the norm, maintaining strong communication with clients can be tricky. Misunderstandings can easily happen when you’re not face-to-face. Accountants need to find ways to keep those lines of communication open and ensure everyone is on the same page. A little extra effort in this area can go a long way in preventing negligence claims.

4. Focus on sustainability and ethical practices

As more businesses prioritise sustainability, accountants will need to think about the ethical implications of their advice. Staying informed about sustainable practices and incorporating them into your services will not only help your clients but also enhance your reputation.

5. Evolving technology and data management risks

With technology playing a bigger role in accounting, there’s a growing risk related to how we manage data. Accountants need to ensure they’re using reliable systems and processes to handle client information accurately. If something goes wrong, it could lead to errors and potential claims. Embracing technology while being mindful of its risks will be essential.

Conclusion

As we reflect on the top accountancy negligence claims of 2024 across ICAEW’s members’ PI insurance scheme, many of the issues stem from fundamental practices within the profession. It’s often the basics that can trip us up. Focusing on accuracy, timeliness, communication, tax advisory, and record-keeping, as well as having a proactive approach to risk management, can significantly reduce the risk of potential negligence claims.

Take AIM and recognise your business risks

For more insights and practical advice on managing negligence claims, be sure to listen to our AIM podcast episode dedicated to this topic. 

Talk to a PI insurance expert today

Find out more about ICAEW members’ PI insurance scheme by speaking to someone in our dedicated ICAEW team. Simply call 0345 894 4684 or get in touch here. If you know what you need, you can buy online today.

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