Audit Insure Briefing 9 09
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Welcome My name is Kerry Henry and I’m the originator of the modern day audit insurance products available to accountancy firms. My background in Audit Insurance dates back to the late 1980’s. I’m acting today in the capacity as a Corporate Authorised Representative of Apex Insurance Brokers (AFSL 236871) with a large number of accountancy firms, across Australia, as long term clients. Audit Insure™ origins date back to 1998 and offers the widest scope of cover currently available in the Australian market place and is underwritten by the highly rated and respected QBE Insurance (Australia) Limited (‘QBE’). Audit Insure™ is exclusively distributed by Underwriting Australia Pty Ltd (‘UAPL’) via licensed insurance brokers. AuditInsure™ is the preferred audit insurance product recommended to accountancy firms and their clients by the majority of insurance brokers across Australia. Whilst this is the best independent testimonial possible, having numerous accountancy firms as clients since 1998 is a further endorsement. About Audit Insure™ Audit Insure™ covers audits of previously lodged returns as well as compliance audits undertaken by State and Commonwealth Government Agencies that administer any form of tax, duty, workers compensation or superannuation funds and contributions. Audit Insure™ is offered on a ‘blanket’ basis (‘all clients in’) or ‘declaration’ basis (‘client opt‐in’) ...
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Welcome MynameisKerryHenryandI’mtheoriginatorofthemoderndayauditinsuranceproductsavailabletoaccountancyfirms.MybackgroundinAuditInsurancedatesbacktothelate1980’s.I’mactingtodayinthecapacityasaCorporate Authorised Representative of Apex Insurance Brokers (AFSL 236871) with a large number of accountancy firms, across Australia, as long term clients. AuditInsure™originsdatebackto1998andoffersthewidestscopeofcovercurrentlyavailableintheAustralianmarketplaceandisunderwrittenbythehighlyratedandrespectedQBEInsurance(Australia)Limited(‘QBE’).AuditInsure™isexclusivelydistributedbyUnderwritingAustraliaPtyLtd(‘UAPL’)vialicensedinsurancebrokers.AuditInsure™isthepreferredauditinsuranceproductrecommendedtoaccountancyfirmsandtheirclientsbythemajorityofinsurancebrokersacrossAustralia.Whilstthisisthebestindependenttestimonialpossible,havingnumerousaccountancyfirmsasclientssince1998isafurtherendorsement.AboutAudit Insure™AuditInsure™coversauditsofpreviouslylodgedreturnsaswellascomplianceauditsundertakenbyStateandCommonwealthGovernmentAgenciesthatadministeranyformoftax,duty,workerscompensationorsuperannuationfundsandcontributions.AuditInsure™isofferedona‘blanket’basis(‘allclientsin’)or‘declaration’basis(‘clientopt‐in’).Thereareseveralwaysthiscanbeachievedofflineoronline.I’lldiscusstheoptions*anddeterminewhichbestsuitsyourpracticesoastoachievemaximumclienttake‐up.(*Ifanaccountancyfirmwantstoreferinterestedclients,wecansetupauditinsurancecoverona‘clientbyclient’basis.)Sufficetosay,yourfirmisneartotallyremovedfromtheongoingprocess.ThePrivacyActstipulatesinitialclientcommunication,however,thereaftertherestoftheadministration;stationaryandhandlingcostsareoutsourcedtorelatedcompany,AuditServicesPtyLtd.Yourfirmhas24/7websiteaccesstoviewclientstatusatanytime,plusreceivesmonthlyactivityreports.Accountancyfirmsaregiventheopportunitytoincludeamargintocoveranyinternalcoststocommunicatewithclients.Themarginispaidonbothnewandrenewedbusiness.Mostaccountancyfirmsaddanominalamountsoastoachievemaximumclienttake‐up.Someaddanextraunitofcostnexttimetheyarebillingtheirclientforgeneralaccountingactivity.Formany,thefinancialrewardcomesfrombeingabletofullyrecoverhoursandcostsincurredinauditactivity.AuditServicesPtyLtdhasalsoestablishedtheirownAuditInsure™policythataccountancyfirmscanutilisefortheirclientsiftheydon’twishtoestablishtheirownAuditInsure™policy.Again,Icanaddressthevariousoptionswithyourfirmatthetime.
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FSRA complianceQBE’sAuditInsure™policyisfullyFSRAcompliant.Referhttp://www.auditinsure.com/qbecl.pdf.ConsistentwithQBE’sobservationatthestartofFSRAin2004,ASICinlate2006ratifiedthatprovidingauditinsurance,aseithera‘blanket’(allclientsin)or‘declaration’(clientsopt‐in),wasdeterminedtobean‘incidentalcomponent’oftheaccountingserviceandthusnotincontraventionofFRSAprovisions.AnaccountancyfirmcandistributeauditinsurancetoclientswithouttheneedforFSRAlicensing.Referhttp://www.auditinsure.com/asic.pdf.PleasenotethatASIC’sratificationhasequalapplicationtoanyauditinsuranceproductofferings,asoutlinedabove.Pleasebewearyofanypartythatclaimsotherwise.What’s the upside? Foraccountancyfirms?Zerocoststoestablishandnearzerocoststoadminister,astheprocessisoutsourced.ClienthastoengagetheaccountancyfirmtoaccessthebenefitsofAuditInsure™.Reducedclientangst.Higherlikelihoodthatclientswillengagetheaccountancyfirmonotherauditrelatedmattersthattheywouldtypicallyavoidonthebasisoffeesbeingincurred.Fullyabletorecoverhoursandcostsincurredinauditactivity,plusfewerwrite‐offs.InvoiceQBEandbepaidwith3‐5businessdays.Improveddebtormanagementandenhancedcashflow.Otherthantheinitialclientcommunication(typicallyundertakenbyemail)allotheractivitiesareoutsourced.There’snofurtherhandlingbytheaccountancyfirm;nostationaryorpostagecosts;nooperationalsoftware;andlimitedinvolvementofbusystaff.Whilsttheprimaryfocusshouldbeon‘clientsign‐up’(keepingthecostaslowaspossiblewillassist),there’stheopportunityforanongoingrevenuestream.Forclients?Accesstopaidprofessionalassistance.Reducedangst.Nostressoncashflowtopayunexpectedaccountancyfeesresultingfromunplannedgovernmentaudits.Audit Insure 9 09 2
What’s covered? What’s not covered? What’scovered?Professionalfeesincurredtoassistaclientrespondtoan‘audit’ofapreviouslylodgedreturnora‘complianceaudit’undertakenbyaStateorCommonwealthGovernmentAgencythatadministerstaxes,duties,superannuationorworkerscompensation,plusfeestocompileandsubmittherelevantclaim.What’snotcovered?1. Dishonestyorfraud.2. Anyamendedassessment,finesorpenalties.3. Auditsonreturnslodgedmorethan3monthsafterprescribeddatesoranyauthorisedextension.4. Knowncircumstances.5. Anyactivitiesinvolvingmoneylaundering;foreignsourcedincomenotproperlydeclared;ortheuseoftaxhavensorthelike.6. Complianceauditsundertakenforthepurposeofanentitymaintainingitsmembership,subscription,registration,operatinglicense,OHSstatusetc.How doesAudit Insure™differ? PolicyappreciationAuditInsure™shouldbeviewedasaformofa‘financialguarantee’.AccountancyfirmsneedtotakealongertermviewofhavingaAuditInsure™policythatwillallowthemtofullyrecoverhoursandfeesincurredinclient‘audit’and‘complianceaudit’activity,subjectofcoursetoclaimsfrequencyandseverity.WhilstAuditInsure™coversotherprofessionalfeecosts,i.e.,obtainingalegalopinionetc.,accountancyfirmshavetheoptiontolimitprofessionalfeestotheirservicesonly.Thisisonthebasisthat(a)establishingtheAuditInsure™policywasprimarilysothattheaccountancyfirmisthebeneficiaryand(b)theinclusionofotherprofessionalfeescostswillimpactontheoveralllossratioi.e.,otherprofessionalsmaybenefit,whilsttheaccountancyfirmispenalisedbyapotentialadverselossratio.Ouraccountancyfirmclientsbenefitfromour15+yearsofspecialisationinAuditInsurance.
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ScopeofcoverIndifferencetomarketofferings:Auditautomaticallyincludesanexamination,inquiry,investigation,questioning,revieworauditof(a)yourclient’sactivitiese.g.,anOSRaudittodetermineifyourclientispayrolltaxcompliantand(b)anyreturns/declarationspreviouslylodgedbyyourclient.Auditalsoincludeswhereanauditisconductedforthesolepurposeofdeterminingifanytaxordutyliabilityexistsorlevyifanyfineorpenaltyshouldbeimposed.Professionalfeesincurredcontinueuntilthesuminsured,nominatedforthatclientfortherelevantperiod,ofinsurance,hasbeenexhausted.Coverdoesn’tstopwhenafinalassessmentisreceivedor12monthsaftertheauditcommenced.There’snotimerestriction,includingwhereacasemaybere‐openedinthefuturebasedonarulingchange.GovernmentAgencyreferstothoseagenciesoverseeingtaxes,duties,superannuationandworkerscompensationpremiums.Withworkerscompensation,thisalsoincludesworkerscompensationplacedwithprivateinsurersinTasmania,NorthernTerritoryandWestAustralia.Allclientsincluded‐allindividuals(andtheirspouseorpartner,irrespectiveofthesizeorsourceoftheirincome),trusts,superfunds(irrespectiveofmembersize),anytradingorbusinessentitiesandthelikearecovered.Progresspaymentswithoutanyqualifications(timingoramount)ordiscretionarywaiversonprogresspayments,however,QBEisn’texpectingTaxInvoicesfornominalamounts.Noculpability.Missedclaims.Ratherthanlimitlatenotificationto30daysaftertheexpirydateforclaimsthatshouldhavebeenreportedduringthepreviousperiodofinsurance,wheretheAuditInsurepolicyisrenewed,the30dayperiodiswaived,buttheamountpaidoftheclaimislimitedto75%.Yes,mistakescananddohappen.What level of sum insured is best? Notwosituationsarethesame,soit’simpossibletoprovideapreciseanswer.
However,overthemanyyears,claimshistorydoesprovidesomeguidance.Ifthesuminsuredselectedisn’tultimatelysufficientforoneormoreauditsthatmayoccurduringthesameperiodofinsurance,comfortcanbetakenthatthemajorityofprofessionalfeesincurredwillbepaid.
Theselectedsuminsuredissharedbythe‘Namestobeinsured’listedbelowandisinclusiveofGST. DirectfamilymembersandcommonmajorityownedentitiesthatformaClientGroupshareaselectedsuminsuredthatisdependentontherangeofexposuretovariousgovernmentagenciesandthecomplexityoftheClientGroup’sfinancialaffairsandstructure.
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AuditInsure™cancoverallindividualclients(although,maynotsuitpurewageandsalaryearners),trusts,superannuationfundsandtrading/notforprofitentitiesetc.upto$50mturnover/revenue.Forclientsover$50mturnover,it’sbesttheyhavetheirown‘standalone/tailored’policyastheirneedswillbemoredetailed.Thesamescopeofcoverapplies–referwww.auditprotect.com.au.Suggested‘shared’SumInsuredsfollow.Refer#belowforadditionalguidance.
SumInsureds
$5K$10K$15K$20K$25K$30K$35K$50K
1. Individualx1 2. Individualsx2 3. Individualsx3 4. Individualsx4 5. Individuals+Trust 6. Individuals+Trust+SMSF 7. Selfemployed 8. Selfemployed+Trustand/orSMSF 9. 1.to6.above+businessupto<$500Kturnover 10. 1.to6.above+businessupto$1.5Mturnover 11. 1.to6.above+businessupto$2.5Mturnover 12. 1.to6.above+businessupto$5Mturnover 13. 1.to6.above+businessupto$10Mturnover 14. 1.to6.above+businessupto$15Mturnover 15. 1.to6.above+businessupto$20Mturnover 16. 1.to6.above+businessupto$30Mturnover 17. 1.to6.above+businessupto$50Mturnover
#thereasonfor2options,inmostcases,recognisesdifferingclientneeds.SomeIndividualsmayhavemoreinvestmentsorseveraltrustsoralargermemberSMSFthanothers.Somebusinessesmayhaveseveraltradingentities.Ifindoubt,we’drecommendthehighersuminsured.Notethat‘Individuals’aresamefamilyordirectorsofthesamebusinessandlistedbusinessesarecommonmajorityowned.)
Excess and pricing Thereisnilexcess.Pricingisdeterminedbythe‘shared’SumInsuredselected.Asanexample,‘BloggsClientGroup’consistsof‘MrBloggs,MrsBloggs,BloggsSMSF,BloggsSmallBusinesswitha‘shared’SumInsuredof$10,000,theannualpremiumis$305.RememberthatAuditInsure™coversboth‘auditoflodgedreturns’and‘complianceaudits’.
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Claims Theclaimsprocessissimpleandtransparent,withclaimsinvoicedtoQBEandpaidwithin3‐5businessdaysfollowingreceiptofrequireddocuments.Oncetheaccountancyformorclientreceivesnoticeofan‘audit’(inthebroaderdefinition),aClaimsAdviceiscompletedandforwardedwithacopyofthe‘audit’notice.Theaccountancyfirmproceedstomanagethe‘audit’usingtheinternalresourcestypicalforthetypeof‘audit’andchargesstandardhourlyrates.RememberthattheAuditInsure™policyneedstobeproperlyused,asanyinflatedcostswillimpactthelossratiowhichdeterminesthelevelofpremiumsorthecontinuityoftheAuditInsure™policy.Oncetheauditiscomplete,werequireaTaxInvoicemadeouttoQBE;WIPswherethefeesareover$1,000;plusacopyofthefinalletterfromtherelevantgovernmentagency.QBEmayrequireadditionaldocumentstoaccesstheclaim.Where‘audits’arelongdated,progresspaymentscanbemade.QBEhasanexcellenttrackrecordinpayingclaims,howeverfromtimetotime,claimsarisethataresubjecttofurtherquestioning,whichcandelaythesettlementprocessorareultimatelydeclinedasaresultoftheapplicationofapolicyexclusion.Overthelast10years,QBEhasencounteredanumberofclaimdifficultieswhereaccountancyfirmclientshavebeenencouragedtosign‐upforinsurancecoverwiththeknowledgethatcircumstanceshaveemergedthatwillleadtoanauditoccurring,i.e.,alargerthanusualGSTortaxrefundortaxloss;asignificantcapitalgainevent;clientswheretherelevantgovernmentagencyhasalreadycommunicatedtheirintenttoinvestigatetheiraffairs;company/phoenixrestructuring;clientsidentifiedasaudittargetsasaresultofapracticeaudit;etc.Inonecase,apartnersignedupjust12ofhisclientsand10wereshortlyaftersubjectedtoaudits,withmostclaimsrejectedduetocircumstanceslikethoseoutlinedabove.Sadly,theseclientswereleftwithanunexpectedclaimoutcomeandtheaccountancyfirmwithanumberofuneasyclientrelationships.Thankfully,the1,000’sofpaidclaimsandpositiveoutcomesfaroutweighsthesmallernumberofproblematicclaims.How do clients sign up? Sincethelaunchoftheoriginalproduct10yearsago,anumberofvariationshavebeentrialledtomaximiseclienttake‐up,whilstatthesametimerelievingaccountancyfirmsoftheneedtobeinvolvedintheongoingadministrationprocessorincurringhandlingcostssuchasstationary,receipting,banking,payments,personneltime,clientsupport,etc.Mostaccountancyfirmshavearangeofclientservicedeliveryoptions,i.e.,annualcontractsorad‐hocbillingetc.Havingastandardisedapproachsimplywon’tdelivermaximumclienttake‐up.
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