Malpractice Exposure

Definition

The legal and financial risk a CPA firm faces when a client suffers harm due to the firm's failure to meet a professional standard of care, such as missing a tax deadline. This exposure can lead to professional liability claims, licensing board complaints, or lawsuits seeking reimbursement for IRS penalties the client incurred. Firms reduce malpractice exposure by documenting their processes, clearly defining service scope in engagement letters, and maintaining proactive client communication systems.