Self-driving cars, production lines, chatbots – it’s safe to say automation has found its way into almost every aspect of society. Accounting is no exception – with aspects of accounting tasks becoming automated, it is worth understanding what this means for an accounting practice’s risk profile. Whether a software tool malfunctions, a security system fails to operate, or an employee presses the wrong button, automation is not failproof. So, what does this mean in terms of liability for financial loss if something does go wrong? And how is liability determined if a claim arises due to a technical complexity? Let’s look at some of the events that can arise from technological difficulties, and how liability may be determined in these instances.

Where there is technology, there is also possibility of a breakdown or malfunction. If your practice has automated some simple tasks which were previously performed manually, it’s important to have a back-up plan in place, in the event this happens. This can even be as simple as ensuring there is an employee in your practice who is trained to perform the task manually should the need arise. Given many automated tasks are those repetitive, rule-based tasks which may have been previously performed in junior roles, it’s possible your skills in those areas may not be up to scratch anymore.

If a malfunction or breakdown leads to your client holding your business responsible for financial loss, it may be covered under insurance in some instances. For example, if a glitch in your computer system led to a client’s files or data being inaccessible, and they were unable to recover all their documentation, your Professional Indemnity Insurance might cover the cost of the claim.

In some cases of technical glitches, the liability may ultimately sit with the manufacturer or provider of your systems or software, and you may have a claim against them for the data loss. However, your practice may still need to initially defend claims from impacted clients as their engagement agreement is with your practice rather than the software manufacturer or provider. You could also still have some liability to the client if the data loss is partly due to an act or omission of your practice in maintaining and operating the system.

While automation greatly reduces the probability of human error, it does not eliminate it. Depending on the automation software, any required human input at some stage can be enough to trigger a human error. It can be as simple as entering an incomplete data file or running a function incorrectly. It’s therefore important for accounting practices to ensure all reasonable care is taken even where there is automation in place. Costly claims of litigation can arise from minor human errors, or in misusing software, and having quality controls in place can help reduce the likelihood of these claims.

There may be a perception that cloud accounting is bulletproof, but this is no longer the case, with cyber attacks on cloud services having doubled in the last few years. This means that it is no longer sufficient for accounting practices to just rely only on the security of the cloud service provider, but also need to have in place infrastructure of their own to protect their business from cyber criminals. If a client of yours suffers a financial loss due to a cyber-attack experienced by your cloud or SaaS provider, the consequences to your business can be significant. Although the liability for the loss may ultimately sit with your cloud service provider, the impact to your reputation could be difficult to repair in the long run.

Of course, one can’t discuss automation in accounting without addressing the potential impacts to accounting jobs. Predictions have pointed to automation mainly impacting work usually conducted at entry-level or graduate roles. Although cost and inertia of many businesses means automation may overtake jobs at a relatively slow rate, it means accountants need to ensure they are upskilling and diversifying their capabilities to suit higher-skill roles like financial planning and analysis or business controlling – which are still likely to be in high demand.

While there are steps you can take to reduce your risk, you can’t eliminate it altogether, and that’s where insurance comes in. As a broker and accounting insurance specialist, Aon helps you find a policy customised for the common risk of your industry so you can have more confidence that you’ve found the right type of insurance for your business. If you’d like to find out more or get a quote, please click here. Alternatively, you can speak with our dedicated Accountants team on 1300 836 028 or email [email protected]