Top 5 claims risks facing accountants in 2025

The surge in corporate insolvencies: Increased risks for Insolvency Practitioners

With rising interest rates and inflation putting financial strain on businesses, corporate insolvencies are expected to increase in 2025. Insolvency Practitioners (IPs) will face greater pressure to manage an increase in cases efficiently while adhering to strict regulations, while also facing the growing recruitment and retention struggles faced by the profession. The heightened scrutiny and pressure may increase the risk of professional negligence claims.

Economic landscape 

Insolvency Practitioners (IPs) now face:

• Higher caseloads – More businesses entering administration or liquidation, with fewer IPs to share the work.
• Greater regulatory scrutiny – Authorities are closely monitoring IP actions to prevent misconduct.
• Increased pressure from Creditors – Demands for greater transparency and efficiency in asset recovery.
• Tighter compliance requirements – More stringent oversight on insolvency processes.

Common issues 

• Mismanagement of assets – Errors in valuation and liquidation could result in financial losses for creditors.
• Failure to act in Creditors’ interests – IPs must balance the needs of all stakeholders.
• Procedural errors – Inaccurate filings or missed deadlines could invalidate insolvency proceedings.
• Conflicts of interest – Improper handling of Creditor relationships could lead to legal disputes.
• Failure to prevent wrongful trading – Directors may claim that an IP failed to take appropriate action to prevent further losses.

Regulatory and Disciplinary Investigations: The rising scrutiny of Accountants

The accounting profession is facing intensified regulatory scrutiny due to high-profile corporate failures and growing concerns over financial misconduct. As oversight tightens, Accountants are more likely to face disciplinary action, regulatory investigations and professional negligence claims. Regulatory investigations, particularly those by the FRC, are very expensive, time consuming and stressful. It should be noted that not all policies have regulatory cover as this is not part of Accountants Minimum Terms.

Why investigations are increasing

• High-profile corporate failures have prompted regulatory bodies to tighten oversight.
• The Financial Reporting Council (FRC) has introduced stricter compliance and enforcement measures.
• The demand for transparency has led to heightened scrutiny of financial reporting and auditing practices.
• Public pressure for accountability has intensified, leading to stronger disciplinary action. 
• Regulators are expanding their scope to include Accountants in both public and private sectors.

Common triggers for investigations

• Non-compliance with financial reporting standards.
• Ethical breaches or conflicts of interest.
• Deficient audit procedures resulting in misleading financial statements.
• Failure to report suspicious activity related to fraud or money laundering.
• Inadequate record-keeping and documentation.

Implications for Accountants 

• Higher risk of disciplinary action – Accountants may face fines, suspensions, or legal action.
• Reputational damage – Even minor infractions can lead to loss of client trust.
• Increased professional indemnity insurance costs – More claims lead to higher premiums for Accountants.
• Potential criminal liability – In extreme cases, non-compliance may result in criminal charges.

How new regulations are raising the stakes for Accountants

Audit reform is reshaping the financial landscape. Greater responsibility is placed on Accountants to ensure transparency, independence, and fraud detection in audits. These changes, while necessary for public trust, may also increase the risk of negligence claims against Auditors.

Key audit reforms in 2025

• Mandatory audit firm rotation to enhance independence.
• Stricter accountability for audit failures and improved quality control.
• Enhanced fraud detection responsibilities imposed on Auditors.
• Greater transparency in audit processes to improve public confidence.
• More severe penalties for non-compliance under revised regulatory frameworks.
• Increased exposure to negligence claims
• More rigorous reviews – Auditors are under greater scrutiny, making errors more likely to result in claims.
• Tighter deadlines – Increased pressure to meet regulatory requirements can lead to mistakes. 
• Legal exposure – Shareholders and stakeholders may pursue litigation for financial misstatements.
• Increased workload for firms – Smaller audit firms may struggle to keep up with compliance requirements.

Expert opinions & predictions

Audit professionals warn that compliance costs will rise, and firms must invest in advanced risk management strategies to avoid negligence claims. Additionally, companies must ensure that their Auditors are well-trained in fraud detection to prevent regulatory breaches.

Tax regulation changes & HMRC investigations: A growing risk for Accountants

Tax regulations are becoming more complex, and HMRC is intensifying its enforcement efforts and developing its resources and caseload capabilities through increased recruitment. Accountants must be mindful and vigilant in navigating these evolving requirements. Continuing HMRC crackdowns on aggressive tax planning has led to high-profile cases where accountants faced legal consequences for failing to comply with disclosure rules. R&D tax credit claims have attracted a great deal of attention by HMRC.

New tax regulations in 2025

• Stricter corporate tax compliance measures.
• Increased penalties for tax evasion and avoidance schemes.
• Expanded disclosure requirements for Tax Advisers.
• Greater focus on digital tax reporting and compliance.

Increased HMRC investigations

• Enhanced scrutiny of high-net-worth clients and complex tax planning structures.
• Greater accountability for Accountants facilitating aggressive tax strategies.
• Introduction of AI-driven HMRC audits to identify anomalies in financial reporting.

Potential issues

• Misinterpretation of tax laws – Constant legislative updates make compliance challenging.
• Failure to disclose tax schemes – Non-compliance can lead to fines and client losses.
• Inadequate representation in HMRC audits – Poor advice during investigations can result in significant penalties.
• Failure to adapt to digital tax systems – Errors in digital filings may lead to regulatory penalties.