Lesson 6: Legal Considerations

Question 1

What is professional liability?

Answer 1

This is when a member is responsible for their actions when fulfilling a contractual obligation.

There is a possibility that the member may have to pay damages.

Question 2

Name three examples of professional liability.

Answer 2

Negligence

Breach of contract

Criminal acts

Question 3

What is negligence?

Answer 3

Negligence is the breach of a legal duty to take care which results in damages to another. If a member’s actions cause financial loss to a client then they may be sued for professional negligence.

Question 4

Name five ways to minimise legal action.

Answer 4

1) before undertaking work, ensure the exact duties are written down i.e letter of engagement
2) any extra duties agreed at a later date must be defined and confirmed in writing
3) if client is given informal advice, they should be made aware that the advice is subject to limitations
4) use a disclaimer clause in any published document
5) have Professional Indemnity Insurance

Question 5

What is Professional Indemnity Insurance?

Answer 5

This is a type of insurance policy designed for accountants and other professionals to ensure that there are adequate funds available to compensate a third party that has won a legal claim for damages.

Question 6

What are the four key crimes under the Bribery Act 2010?

Answer 6

Making a bribe

Receiving a bribe

Bribing a foreign public official

Failing to prevent a bribe

Question 7

Name four ways to prevent bribes.

Answer 7

1) have a clear policy on gifts and hospitality
2) appoint a senior member of staff as a bribery officer
3) retain evidence of expenditure, gifts and hospitality
4) staff training

Question 8

What are the penalties under the Bribery Act 2010?

Answer 8

If an individual is found guilty of one of the first three crimes - 10 years imprisonment and an unlimited fine

Any company/partnership found guilty of the fourth crime receives an unlimited fine

Question 9

If prosecuted under the Bribery Act 2010, what else can this lead to?

Answer 9

Confiscation order (POCA, 2002) - this prevents the defendant from benefiting from their crime by making them pay a sum of money equivalent to the amount obtained.

Civil recovery order (POCA, 2002) - returns the property that is proven to be the proceeds of unlawful conduct.