Audit Insurance: All Facts You Need To Know

You can’t afford not to have audit insurance, especially if you’re a business owner. In fact, all business owners should have this coverage in case of an audit and the consequences that may arise from it.

Why do you need audit insurance?

Audit insurance helps protect your business from the risks associated with an audit. If you’re audited and your business is found to be in non-compliance, your audit insurance will cover the cost of what could amount to tens of thousands or even millions of dollars in fines, penalties, interest and legal fees.

In addition to helping you avoid financial loss due to non-compliant audits, audit insurance also helps protect against many other types of financial damage that may result from an audit.

For example:

• Audit claims: A claim on a policy can help offset any damages that result from an alleged violation or wrongful act during a regulatory inspection (such as fraud). Claims are usually made against all parties named in a complaint rather than just one party at fault—so if someone files a claim alleging wrongdoing by both yourself and another member of your organization (say, one employee against another), it could be covered by audit liability coverage.
• Challenges: In some cases where there is no case pending but there still may be pressure coming from regulators or regulators have expressed concern about compliance issues within their jurisdiction (for example state tax departments), having adequate coverage may give companies more confidence in moving ahead with whatever course correction process was outlined for them without fear that any monetary penalties incurred would not be covered by their existing partnership agreement(s).

Who needs audit insurance?

Audit insurance is important for any company that has a large amount of cash at risk or that has a high value of assets.

Audit insurance is also important for companies that are in the financial services industry, such as banks and insurance companies. In fact, most state and federal regulators require audit insurance as part of the licensing process.

How does audit insurance work?

Audit insurance is a type of insurance that protects the audit firm and its staff from legal action. The client pays for this type of insurance, not the auditor.

If an auditor loses a case, clients typically pay all legal costs associated with defending themselves against the claim, but in cases where the audit firm’s insurance company pays for damages awarded by a court (including any court fees), it’s likely that these costs will be passed on to you if your audit firm has bought audit insurance.

How can you get audit insurance?

If you’re interested in audit insurance, the first step is to contact a broker. A broker will be able to tell you more about the different types of policies available and help you decide which one best suits your needs.

A number of financial institutions have audit insurance coverage. As an added benefit, many large banks offer their employees free or discounted coverage under certain conditions (for example: if they are employed with them for at least two years).

If you don’t bank with one of these companies, it may still be worth asking them about their audit insurance options as they often offer similar policies through affiliated agencies.

If you don’t bank with any of these institutions then it’s worth speaking to your accountant who should be able to recommend an advisor who can help find an affordable policy for your business that meets all your needs.”

The next time you hear about audit insurance, don’t be afraid of it. Instead, ask questions and learn more about the benefits of this type of insurance for your company.