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FOR IMMEDIATE RELEASE

CAMICO CLAIMS EXPERT OFFERS ADVICE FOR CPAs ENTERING TAX SEASON

REDWOOD CITY, Calif., November 30, 2005 - CPAs wading into tax season should be aware of heightened exposure to liability as clients make crucial year-end decisions about how to manage tax liabilities for 2005, according to CAMICO Mutual Insurance Company (www.camico.com) the nation's second largest provider of professional liability insurance for CPAs.

Ron Klein, vice president of claims for CAMICO, says that the technical nature of the tax issues and the financial complexity of business clients can create heightened risk exposures for CPAs who provide tax advice and services for business clients.

In this environment, "the tax professional must be sure of his or her competency and ability to render the best advice possible for the client," he says. "In addition, there are a number of fundamental steps the CPA can take to mitigate the risks associated with tax work.

"In the realm of income taxation, the CPA's job is to advise and warn the client about alternatives and their possible benefits and risks," Klein adds. "Once the choice of alternatives is made, document why the choice was made and the client's involvement. The CPA may also get a second opinion from another tax specialist, much like a doctor getting a second opinion from another specialist."

Klein offers the following loss control techniques to accountants involved in tax engagements:

SCREENING
Careful screening of the firm's clients and engagements will help to avoid "engagement creep," whereby the scope of an engagement may begin to extend beyond the competencies of the CPA firm. All clients and engagements should be re-evaluated on a regular basis, at least annually, to assure the firm is:

• capable of performing the services required by the engagement, and
• is performing the services frequently enough to become proficient at them.
   

IDENTIFYING HIGH RISK CLIENTS
Some clients are much more risky than others. The risky clients can be identified by:

• running credit checks,
• examining previous financial statements,
• examining the client's prior accounting firm's management letters, and
• interviewing the client, the client's key personnel, bankers, legal counsel, prior accountants and auditors.

S CORP. ELECTIONS
Clients who make choices about S corp. elections do so primarily for tax benefits. When they do, they make assumptions about the future which may or may not come true. When events make their choice less beneficial than originally thought, the CPA is exposed to liability. CPAs can also face liability from not consulting with clients regarding S elections. For example, a consultation should occur when a closely held C corporation has substantially appreciated assets. In helping clients decide about corporate disposition, CPAs should:

• Provide the client with a full consultation of all negative and positive tax ramifications involved.
• Document the consultation in an "informed consent" letter, providing a brief summary of the issues discussed.
• In the letter provide places where the client can acknowledge they have read and understood the summary letter and which provide the client an opportunity to affirmatively indicate they either do, or do not want an S-corp. election.
• Informed consent is always important, but it is even more so in this situation because of its technical nature and the limited ability of the client to discern the pros and cons," says Klein. "Documentation will prevent the client from later asserting that your firm is responsible for unexpected events and for less than optimal results."

ESTATE TAX PLANNING
Generally, there is a very long lead time between the time estate planning decisions are made and the time that the results of the decisions are known. Memory of the CPA's advice and the client's decisions fade over time, making documentation of the advice and decisions all the more important. CAMICO offers the following risk avoidance ideas for estate tax planning:

• Make it a policy to put all planning advice in an "informed consent" letter, outlining the positive and negative consequences of all options in terms the client will understand and obtain the client's consent. Without this letter, it is easier for claimants to make it appear the CPA made the decisions.
• Tax professionals must be certain of their competency in this area and must be sure to document both: 1) the reliance upon the attorneys drafting the estate plan; and 2) which professionals are responsible for each aspect of the plan.

"When a client dies, the CPA may be dealing with unhappy, potentially litigious beneficiaries," Klein notes. "We know that there will be no deposition from the deceased client, so the documentation from the original planning and decision-making process becomes the CPA's primary line of defense."

For more information about CPA liability in tax season, visit the CAMICO Web site at www.camico.com.

About CAMICO
CAMICO Mutual Insurance Company (www.camico.com) is the nation's largest CPA-owned provider of professional liability insurance and risk management programs for the accounting profession. The company currently serves 6,766 accounting firms and 52,000 staff members in 44 states and the District of Columbia. CAMICO is also sponsored by state CPA societies in Arizona, California, Colorado, Indiana, Kentucky, Mississippi, Missouri, Nevada, New York, South Carolina, Tennessee and Washington.