Let’s Talk about Alternative Dispute Resolution and not Tax in Tax Season for Accountants

There are so many changes that are made in accounting, auditing, tax and consulting standards that the overlooking of how disputes are solved is a very real possibility.  This is why users and providers of these services should be familiar with the benefits and disadvantages of the various different Alternative Dispute Resolution (ADR) Services.  We will, therefore, suggest that ADR clauses be used in the engagement of services contracts.

CPAs have to consider the wording of any ADR clause approved by a professional liability insurer and legal counsel. These days, most professional liability insurers advocate for the use of non-binding forms of dispute resolution and some may even require this in order to reap the benefits of insurance.

The most common ADR methods available are mediation and arbitration. These are also governed by the AAA’s Accounting and Related Services Arbitration Rules and Mediation Procedures. The process is fair and impartial. To ensure that the ADR clause does not affect a CPA’s independence, the wording must be drafted carefully and in line with the   AICPA Code of Professional Conduct  Rule in Section 1.228.  This gives a generic guide on the use of dispute resolution forums and liability limitation clauses. The inclusion of such clauses does not absolve liability of being unable to meet professional standards.  CPA’s may also need to be required to report a judgment in excess of $25,000 whether granted in court or arbitration.  This amount varies from jurisdiction to jurisdiction.  For that reason, knowledge of the rules is important.


The first step in the settlement of a dispute must always include negotiation.  Parties must make an effort to resolve in the best and least expensive way possible.  Sometimes, ego can come into play and undermine the process.  However, if parties are able to manage their emotions, it will be the most economic outcome, utilizing less time and money.  Negotiations can never take place in bad faith.  If so, involve an attorney that can carefully oversee and draft the proper terms.  They can also intervene on your behalf. 


Business owners or managers are more inclined to be comfortable with mediation than with other forms of ADR. It’s as simple as this: it is nonbinding with a neutral, third-party facilitator.  They do not come up with the settlement and only encourage parties towards it.  Agreements can be tailor-made to reflect the outcome as well.

The mediation process does, however, have some drawbacks. Each side exposes its position, thereby giving the other party the opportunity to gain some limited knowledge that could be used later, if the mediation fails, in binding arbitration or at trial. In addition, all parties must truly want to resolve the dispute; it requires a good faith belief in the process and a willingness to accept a less-than-total win. If a mediation fails due to lack of good faith, it delays the end of the dispute and can add to the cost of resolution.


Is the most formal process of ADR and is similar to litigation where positions are argued and sides are presented.  It is more flexible than litigation and can remain private and often confidential. It cannot be made public unless the parties consent.  It is also quicker and less expensive than litigation.  On the flip side, filing fees are more expensive than the court and the arbitrator’s time can be equally costly.  Arbitrators have knowledge of the profession from a litigation perspective and discovery is limited.  Authority to compel is also virtually nil.

Drafting Dispute Resolution Clauses

The mediation/arbitration clause can be tailor-made to be simple or complex by both the CPA and client.   It is recommended that a CPA firm should get the explicit approval of its professional liability insurer.  Such a clause can extend and affect the manner in which the insurer must handle an error or omissions claim. Having a  lawyer to guide you through the process always helps!

https://www.cpajournal.com/2017/12/27/alternative-dispute-resolution-accounting-related-services-disputes/We have drafted many arbitration and mediation agreements.  We have litigated numerous cases before different arbitration organizations including the American Arbitration Association, Better Business Bureau. FINRA and JAMS.  Super Lawyers named Illinois commercial law trial attorney Peter Lubin a Super Lawyer and Illinois business dispute attorneys Patrick Austermuehle and Andrew Murphy Rising Stars in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Illinois business trial lawyers have over thirty years of experience in litigating complex class action, copyright, noncompete agreement, trademark and libel suits, consumer rights and many different types of business and commercial litigation disputes.  Our Orland Park and Downers Grove business dispute lawyers, civil litigation lawyers and copyright attorneys handle emergency business lawsuits involving copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist Chicago and Oak Brook area businesses and business owners who are victims of fraud. You can contact us by calling at 630-333-0333.  You can also contact us online here.

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