As a CIMA Member in Practice (MiP) you must have Professional Indemnity Insurance (PII). Not only is it a mandatory requirement, it is also in your interests and that of your business to have appropriate levels of Professional Indemnity Insurance.  

Not every business is the same and requirements for cover will vary from business to business, therefore CIMA suggests you always talk to a broker about finding cover that is specific to your business and suitable for your needs. 

What is Professional Indemnity Insurance?

If you are alleged to have provided inadequate advice or services to a client, Professional Indemnity Insurance can help protect your business.  It can offer cover if you need to pay compensation to your client to correct a mistake and can also provide cover for the legal costs and expenses in defending the claim.

Regardless of your level of experience, there is always the possibility you (or one of your team) could make a mistake. Professional indemnity insurance can give you cover in a wide range of scenarios, including:

• Professional negligence (i.e. making a mistake in a piece of work for a client)
• Loss of documents or data
• Unintentional breach of copyright and/or confidentiality
• Defamation and libel
• Loss of goods or money (your own or for which you are responsible)

What limit of professional indemnity do I need?

CIMA does not advise on the level of cover you are likely to need, as this must be assessed according to your circumstances. In considering what level of cover is suitable for you, you may wish to: 

• Speak to a broker.
  A qualified broker can advise you, based on the information you provide about your business and risks associated with the business and your clients;
• Be specific about your needs: assess your business risks, client profile and even the location of your business e.g. do you rent an office or work from home?
• Check other sources of information, the FCA provides a useful factsheet on PII for anyone working in a regulated industry;
• Seek guidance from others, including other members in practice;
• Think carefully about any particular risks associated with your client base or practice;
• Be aware of legislative and/or regulatory requirement on you: e.g. do you advise on a particular area such as tax or company formation?
• Revisit your requirements in the light of client profile, risk, size of business etc. during the year, to ensure your cover continues to be sufficient.   
  

Some insurers may offer cover for disciplinary proceedings by a professional body, but this is not usually included in a standard PII policy. It may be included as an add - on and should therefore be discussed with your broker when reviewing your business risks and potential costs.
CIMA does not require this type of insurance as, based upon the number of MiPs taken to a disciplinary hearing each year is low – it is entirely up to you whether you consider it.

Although the likelihood of disciplinary proceedings is low, the impact may be high in terms of costs and time, especially if you decide to engage legal counsel.
As with all risk, you and your broker must discuss the probability of an event and the cost of cover.

The number of MiPs taken through the disciplinary processes is low and many issues are resolved at Investigation Committee stage with low level sanctions and corresponding low fines and costs.

CIMA expects Members in Practice to behave professionally at all times and remain compliant with the Regulations and Code of Ethics. If you take this approach you can guard against being taken through a disciplinary hearing.
CIMA does not initiate disciplinary proceedings in the case of client/accountant disputes as long as you continue to behave professionally throughout.

The duty of fair presentation

Under the Insurance Act 2015 you must make a ‘fair presentation’ of the risks to your business. Failure to disclose all the facts around your insurance requirements could adversely affect the validity of your insurance policy. Members are encouraged to seek the advice of their broker around the requirements. 

Key points:

• Take expert advice from a PII provider as to how much cover is available and at what costs;
• Seek to quantify personal/practice exposure to risk;
• Consider whether in the unlikely event of a client making a complaint to CIMA legal costs arising from your defence of the complaint would be included in the cover;
• Assess whether the anticipated protection is sufficient to meet potential claims and is consistent with that of similar firms (your insurance broker will be able to assist with this);
• Consider to what extent if any claims can be met from the practice’s resources;
• Consider carefully the need for run off cover, which operates for a defined period after the practitioner has ceased to practice (e.g. on retirement).  

CIMA produced a useful guide PDF (52 KB) showing how requirements differ for different business types.

The more information you can provide a broker, the more suitable your cover will be.
Please note, members in practice are free to choose an insurance provider of their choice.

If you have difficulty obtaining cover or need further advice please contact CIMA Professional Standards team.

 
MiPs in the Republic of Ireland who are acting as liquidators

IAASA recently made Regulations setting Professional Indemnity cover requirements for liquidators.

The Statutory Instrument came into effect on 1 June 2016.

Statutory Instrument 127 of 2016 Companies Act 2014 (Professional Indemnity Insurance)(Liquidators) Regulations 2016

Please also note that sections 633 and 634 of the 2014 Act now provide a statutory regime governing qualifications for appointment as a liquidator or provisional liquidator.
To qualify for appointment as a liquidator of a company, CIMA members must: 

• hold a current practising certificate;
• and comply with the PII requirements set out in the Companies Act 2014 (Professional Indemnity Insurance) (Liquidators) Regulations 2016 which sets a minimum PII threshold cover of €1,500,000. 

Keeping PII details up to date with CIMA

PII records  must be kept up to date with CIMA. Upon renewal of the policy please update the details online through your MY CIMA account.

As part of CIMA's ongoing quality assurance processes, CIMA conducts checks to ensure that members' PII details are current.

Members in practice are required to provide written terms of engagement for all clients they have a direct business relationship with, and therefore are paid directly by that client. This is a formal agreement between them and their client, detailing the responsibilities of each party and the nature of the work required.

It is mandatory to have terms of engagement in place before applying to become a CIMA Member in Practice. Confirmation of compliance is required as part of the member in practice application. A copy of the terms of engagement must be submitted to CIMA upon request as part of its quality checking procedures.  

Discussing terms with clients

Before drawing up terms of engagement, there should be a discussion covering the service(s) the client wants the practitioner to provide and their responsibilities as the client.
In doing so members in practice should:

• Establish a thorough understanding of the client's requirements and clarify any doubtful points;
• Ask the client's opinion where appropriate and recognise that terms of engagement will often encompass matters raised by the client as well the practitioner;
• Ensure the client is aware of any work that they must do, or any information they must provide, to enable the practitioner to act;
• Never under any circumstances promise anything that is not capable of being delivered;
• Always consider any conflicts of interest that may arise with clients when entering into an engagement;
• Include information around compliance with anti-money laundering regulations in terms of engagement. 

Example format and contents

CIMA has an example of terms of engagement which outlines key areas to address and a useful guide showing how requirements differ for different business types.

The client may require some additional work to be undertaken that is not reflected in the terms of engagement.

It may be recognised that the practitioner cannot meet an agreed deadline for the completion of work, for reasons that the client needs to know and understand.

• Feedback form example (PDF 27KB).

An example of more detailed terms of engagement can be found here,such document was created through a collaborative working party that included the AAT, CIOT, CIMA, ICAEW, ACCA, ICAS and IIT.

Revisiting the agreement

At any point once work has commenced for the client, the terms of engagement may lose their currency because: 

• The client may require some additional work to be undertaken that is not reflected in the terms of engagement.
• It may be that the practitioner cannot meet an agreed deadline for the completion of work, for reasons that the client needs to know and understand.

All Members in Practice must have complaints handling procedures in place.

Any member wishing to gain Member in Practice status must confirm they have complaints handling procedure in place as part of their application. A copy of this must be submitted to CIMA upon request as part of its quality checking procedures.

A recognised policy on complaints (and the procedures to support the policy) is the most effective method of ensuring that differences of opinion do not become complaints.

Clients must be informed that an internal complaints procedure is in place and it may be wise to include a reference to it in the letter of engagement. When an issue arises that may prompt a complaint, or there may be a reason to believe the client is dissatisfied, keep the client advised that matter is being dealt with and give them an opportunity to contribute their views.   

Please also refer to CIMA's example complaint handling procedure within our terms of engagement section.  

Suggested procedures

A complaints procedure may consist of:

• A policy statement (for public display and/or inclusion in practice literature, especially within the terms of engagement).
• A complaint record form.
• Appropriate training for all staff and partners.

Should the complaint escalate, CIMA's independent alternative dispute resolution scheme guidance may be useful.

The continuity partner (CP) is an important differentiator between CIMA Members in Practice (MiPs) and other accountants, qualified or otherwise, who are not members of CIMA. It is encouraging for clients to know that their immediate deadlines and other urgent work will be facilitated by another accountant that understands their needs.

All MiPs must ensure that services to their clients are maintained in the event of their illness, disability, death or dissolution. This can either be through an internal arrangement within your practice, or through a written agreement with another accountant or firm. The CP agreement should at the very least cover the essential services that you provide.

The arrangements for the continuation of your practice between you and your CP must be recorded in writing as required by Rule 6(iii)  of the Member in Practice Rules. It is mandatory that a CP is in place prior to applying to become a CIMA MiP.

As part of the member in practice application, you will need to supply the full name of your CP, their practice name and full address. It is not possible to complete the application without this information.

Notifying interested parties

Once the continuity agreement has been signed, you are advised to notify all interested parties. Other than the person or firm with whom you have a CP agreement, this means:

• Your dependents.
• Anyone else who provides you with professional services (eg banks, solicitors, your professional indemnity insurance/general insurance providers).
• Any client(s) whom the agreement may concern; in particular, these clients must be advised of their right to choose whether or not the alternate is to act on their behalf in the event of the continuity arrangement becoming operational.

Monitoring of Compliance with the Mandatory Requirement to have a Continuity Arrangement

CIMA conducts quality assurance checks on continuity arrangements. You must submit a copy of your continuity agreement to CIMA upon request.

Frequently Asked Questions

Sample continuity agreement

See CIMA's sample continuity agreement and a useful guide showing how requirements differ for different business types.

Disclaimer: members should always take appropriate legal or other advice before using CIMA's sample continuity agreement as a basis for their own document and should ensure that they are fully adapted to the particular circumstances.

Where a member uses these illustrative forms for any purpose, he or she acknowledges that CIMA accepts no responsibility or liability whatsoever in connection with any matter, dispute, or action arising out of such use or as a result of any consequential contractual relationship between members in practice and their clients.

CIMA's CPD is a mandatory requirement of CIMA membership, members must submit their records to CIMA upon request for monitoring.

Any member selected for CPD monitoring during the annual renewal process will be notified by CIMA by email. 

• CIMA's CPD Regulations

 

• CPD Resources

It is a mandatory requirement that all CIMA members in practice comply with money laundering regulations.

For further information check the anti-money laundering section of the member's handbook.