Professional standards limited liability scheme

The Professional Standards Council has formally approved a five year limitation of liability scheme for Chartered Accountants Australia and New Zealand (the new trading name of the Institute of Chartered Accountants in Australia and the New Zealand Institute of Chartered Accountants).

The new Chartered Accountants Australia and New Zealand scheme took effect on 8 October 2014.

Chartered Accountants Australia and New Zealand liability cap
Category 1  

Audit 
Category 2 Insolvency,

Category 3 
Other
Minimum cap where fee is less than $100k $2m              $2m
Fee is $100k or more but less than $300k $5m $5m
Fee is $300k or more but less than $500k

$10m $10m
Fee is $500k or more n/a $20m
Fee is $500k or more but less than $1m $20m  n/a
Fee is $1m or more but less than $2.5m $50m n/a
Fee is $2.5m or more $75m n/a

CPA Australia’s new schemes progressively took effect between 8 October 2013 and 21 April 2014.

CPA Australia liability cap 
Category 1  

Audit 

Category 2 Insolvency,

Category 3 Other   

Minimum cap where fee is less than $10m $2m              $2m
Fee is between $10m and $20m $10m $10m
Fee is more than $20m

$75m $20m

What does this mean for CPA Australia members in partnership with Chartered Accountants Australia and New Zealand members?

CPA Australia public practice certificate holders who are in partnership with holders of a Chartered Accountants Australia and New Zealand public practice certificate will need to increase the sum insured on their professional indemnity insurance (PII) policy to more than $2 million if the highest individual engagement fee billed by the practice in a single financial year is $100,000 or more.

CPA Australia certificate holders in partnership with holders of a Chartered Accountants Australia and New Zealand certificate have to meet the higher PII requirement.

This means that where the highest individual engagement fee billed by the practice in a single financial year is $100,000 or more the practice will need to meet Chartered Accountants Australia and New Zealand's minimum PII requirements, not CPA Australia’s minimum PII requirements.

For example, where the highest individual engagement fee billed by the practice in a single financial year is $300,000 the practice will be required to have a minimum of $10 million in PII cover.

It is up to each member to ensure that they consult with their broker to ensure they have appropriate insurances for their practices, including the applicable minimum levels under the limited liability schemes.