Risk Management Plan - Assignment Example

Risk Management Plan Legal Risk Management Plan for an Accounting Firm Accountants are known to be ahead of other professionals when it comes to risk management. Risk management is identification, evaluation and prioritization of risks followed by monitoring of these risks through economical applications to reduce the probability of unfortunate events from occurring and thus maximize on opportunity realization (Buchan, et al., 2012). A risk management plan is a document that lists the risks anticipated and their mitigation measures.

In accounting there are several risks, however accounting firms need to seek more assurance regarding legal risks; reputation damage, firm position, claims from third parties due to tax schemes, contractual risks and regulations and policy changes.Legal risk management for accounting firms should start with an engagement letter that contains terms of business, scope of work, and a reasonable liability cap. Engagement letters ensures the identity of all the contracting parties that rely on accountants work.

This letters are important to the firm to reduce the amount of claims from third parties in the company. There are also different policies and regulations that govern the accounting firms; Ontario requires that all certified general accountants should have a mandatory errors and omissions insurance (Buchan, et al., 2012). These policies can change with time and this poses as risk to the company. A legal risk management framework is advised to ensure that the organisation will pursue its corporate objectives and aims within its legal obligations for example, legislation, codes of practice, and significant contracts.

Compliance with auditing standards has to be followed in accordance with the Auditing Practices Board. Training of employees and proper planning of the work is therefore essential. The relationship between the accounting firm and the entity being audited maybe the source of audit failure to detect issues in audit (Buchan, et al., 2012). Training of employees should be thorough to allow them to pick up the warning signs for example, unexplained debts, late information provision and risk management lack in an entity.

Failure to incorporate such information in audits may lead to the closure of the firm. Audit software packages should be revised on yearly basis and professional sceptism should be maintained when carrying out an audit.In reference to insurance, indemnities and warranties should be well considered to avoid catastrophic claims against the accountant professional. It should be ensured that the indemnity clause is well capped with a financial limit. Claimants are always on the look out for the firms with the longest indemnity insurance.

Proper and clear separation of legal personality ois important, so is the introduction of all contractual members to the clients. In starting a new accounting firm, the proprietor should include a clause that does not allow claims to be brought against subcontractors. In summary an integrated risk management plan for a new accounting firm will involve having an engagement letter that outlines the objectives and aims of the firm through the policy statement, a reasonable liability cap that withstands challenge, clear scope of work, defined terms, the right approach to confidentiality and making sure that everything is documented will help to keep the legal risks at bay for the accounting business.

Through out the process of risk management, it is essential to retain a good communication line with the stakeholders involved. Clear reporting lines should be established to ensure that the legal issues and emerging concerns are visible to all individuals. Decisions made in reference to risk management plan should be stored in a legal due diligence file.ReferencesBuchan, M., Coley, D., Filsinger, K., Olivo, L. M., Rock, N., & Wheeler, C. (2012). Canadian business law. Toronto: Emond Montgomery Publications.