Compulsory civil liability insurance of auditors and audit organizations
Audit practice is a very delicate and complex activity. No one is immune from mistakes. The only one who will be on your side in that case is your insurance company.
By accepting our partnership offer in the insurance of your liability, you make the resolution of your accidental troubles our permanent responsibility!
In Kazakhstan, since 2003, liability insurance of audit organizations has been carried out on the basis of the Law of the Republic of Kazakhstan dated 13 June 2003 No. 440-II "On Compulsory Civil Liability Insurance of Audit Organizations".
What is accepted for insurance?
Your liability and your property interest connected with the obligation, established by the civil legislation of the Republic of Kazakhstan, to compensate property damage caused to your clients in the conduct of an audit are accepted for insurance.
For what amount will your liability be insured?
The amount for which your liability will be insured is set by agreement of the parties, but it must be not less than 10,000 MCI.
How much does an insurance policy cost?
The amount of the insurance premium is set by agreement of the parties, but must not exceed 4.5% of the sum insured.
How much money will the insurance company pay if an insured event occurs?
The insurance company determines the amount of the insurance payment on the basis of your client's claim, under a court decision that has entered into legal force on compensation of the harm caused, but not more than the sum insured.
Who needs the policy
Every audit organization operating in Kazakhstan must have a compulsory civil liability insurance contract. The policy is needed not only to comply with the law: clients, especially large companies and tender participants, often ask for confirmation that the auditor's liability is insured and pay attention to the amount of the sum insured. Related services — consulting, bookkeeping, tax advice — as a rule do not count as audit, and a separate voluntary contract is needed to protect them.
What situations the insurance covers
- An erroneous audit opinion on the basis of which a client made a decision and suffered property damage.
- An unintentional breach of audit standards that resulted in losses for the client.
- Errors by employees of the audit organization made in carrying out an engagement.
- Costs of defending a claim — if such cover is expressly provided for in the contract.
What is usually not covered
- Intentional acts of the auditor or audit organization.
- Claims connected with services that are not audit.
- Fines and other sanctions imposed on the audit organization itself.
- Claims for events outside the period defined by the contract.
The exact list of exclusions is determined by the law and the contract, so it is worth reading before signing the policy.
What the cost depends on
Within the limit established by law, the premium depends on the chosen sum insured, the scope and nature of audit engagements, the industries in which the clients operate, the number of auditors and their experience, the claims history and the quality of the internal control system. An audit organization with transparent procedures and no losses can usually count on more favourable terms.
How to choose the sum insured
The statutory minimum is a lower bound, not a recommendation. If your clients include large companies, financial organizations or subsoil users, the possible harm from an error in an opinion may exceed the minimum limit. It is sensible to match the sum to the scale of engagements and the possible consequences of an error for the client: anything above the limit will have to be compensated from your own funds.
What to do when a client makes a claim
- Record the date the claim or lawsuit was received and notify the insurer immediately.
- Do not admit the claims or promise compensation without agreement with the insurance company.
- Collect the audit engagement contract, working papers, correspondence with the client and the audit opinion.
- Take part in the court proceedings jointly with the insurer.
- After the court decision enters into legal force, pass it to the insurer for payment.
Common mistakes
- A gap between the end of the old contract and the start of the new one.
- A sum insured at the minimum level when working with large clients.
- Late notification of the insurer about a claim.
- Incomplete retention of working papers, without which it is hard to prove the circumstances.
Frequently asked questions
Can the sum insured be increased during the year?
Usually yes — by agreement with the insurer with an additional premium. The terms are clarified when the contract is concluded.
What happens if the harm is greater than the sum insured?
The insurer pays within the limit, and the client has the right to recover the rest from the audit organization.
You can calculate the approximate cost in the auditors' liability insurance calculator, compare insurers in the list of insurance companies, and other programmes are described in the liability insurance section. To choose the optimal limit and terms, you can get a consultation from a broker.