Are You (and Your Professional Standards) Ready for Busy Season?
We’re at the time of year when many CPAs start gearing up for their busiest work cycles: year-end and tax season. CPABC’s Professional Conduct department often has a busy season as well, as a result of year-end and tax-related client complaints. Accordingly, this article reminds public practitioners of the key questions they should ask to help keep complaints at bay.
If you’re a public practitioner, ask yourself the following questions:
Are My Engagement Letters Ready And Up to Date?
The CPABC Code of Professional Conduct (CPA Code) does not specifically require members to obtain engagement letters. However, because engagement letters can help members address several of the rules contained in the CPA Code—such as 202.1 (Integrity and due care), 206 (Compliance with professional standards), 214 (Fee quotations and billings), and 218 (Retention of documentation and working papers)—it is always wise to obtain a signed engagement letter from a client. (Consider also that engagement letters often form “Exhibit A” in any client-service dispute that ends up being litigated.)
A well-written engagement letter is one that outlines the nature and extent of the services to be provided. It may stipulate the:
Objectives and purpose of the engagement;
Scope of the work;
Timelines and deliverables;
Responsibilities of both the accountant and the client;
Fees, billings, and retainers;
Dispute resolution process;
Limitation of legal liability1; and
Document ownership (especially when bills go unpaid).
Some of the complaints received by the Professional Conduct department can be attributed to poorly written (or non-existent) engagement letters. “Scope creep” commonly occurs when members aren’t clear about the services they’ll provide, and it often leads to complaints about fees.
In addition, we frequently encounter members who have used generic engagement letter templates from practice manuals or software programs. These are never ideal. So we recommend instead that you take the time to customize your engagement letters and ensure that they’re written in plain language.
Have I Reviewed My Document Retention Practices and Procedures?
Rule 218 of the CPA Code (Retention of documentation and working papers) requires that members take reasonable steps to maintain the information for which they are responsible, including working papers and records that support their work. The guidance to Rule 218 recommends that practitioners maintain such records for a minimum period of 10 years, recognizing that some other documents (such as financial statements, tax files, and corporate documents) may need to be maintained permanently. Note: This rule applies to the documentation relating to existing and former clients.
Many professionals have opted to go paperless, and it is indeed acceptable to maintain all your records electronically. In British Columbia, the Electronic Transactions Act provides that, except for a small subset of legal documents (such as wills and powers of attorney), all documents can be managed and stored electronically without a corresponding paper copy. Bear in mind, however, that members who have clients in the public sector in BC may be subject to the requirements of the Freedom of Information and Protection of Privacy Act as well. If you fall under this category and you’re using cloud services, you must ensure that any personal information in your files is being stored in Canada.
Am I Saying “no” to Work That’s Outside My Licensed Category or Skill Set?
Each year, we encounter members who took on engagements that ultimately proved too challenging for their skill sets, particularly during the deadline-driven peak season. Rule 203 of the CPA Code (Professional competence) requires members to sustain their professional competence in all areas of their practice. In other words, practitioners should avoid providing advice or services unless they have the professional knowledge and competence to deal with the challenges of the engagement.
For example, practitioners with lawyers as clients should not take on engagements that involve reporting on a lawyer’s trust accounts to the Law Society of British Columbia without being fully prepared and properly licensed by CPABC to do so. Such engagements involve the application of specific auditing procedures, proper planning, and, again, appropriate licensing.
Here’s another example—this one from an actual case that involved government assistance for taxpayers with disabilities. CPABC disciplined a tax practitioner who failed to recognize that a client who’d moved to another province was now subject to different rules for government assistance. The practitioner miscalculated the disability credits, which were then disallowed by the Canada Revenue Agency, causing significant financial hardship to the client’s family.
Are My Confidentiality Practices Meeting Standards?
Rule 208 of the CPA Code (Confidentiality of information) deals comprehensively with the importance of confidentiality. Confidentiality is one of the fundamental principles of the accounting profession, and the importance of maintaining high standards cannot be overstated. Do you:
Ensure that client records are securely stored, especially after hours?
Ensure that client records (such as T-slips) are not accidentally mislaid or mixed with another client’s materials?
Ensure that electronic documents are sent and stored securely, through encryption or another similar safety measure, such as a Canadian cloud-based portal?
Conduct background checks on your employees to ensure they are of good character—especially the casual employees you bring on during peak season?
Each of these questions relates to scenarios that have brought CPAs to the attention of CPABC’s Professional Conduct department. Don’t be the next CPA to make the same mistakes.
If you work in public practice, it’s likely that year-end and tax season will always be your busiest times of year. During these periods, as you devote all of your skills and many waking hours to deliver quality services to your clients, remember to pay attention to the requirements of our profession, as outlined in the CPA Code. Doing so will help you ensure that no complaints come your way.
Do You Need Guidance?
CPABC has professional standards advisors who are here to help you understand the CPA Code. All discussions are confidential, non-binding, and unofficial. Contact the Professional Conduct department at firstname.lastname@example.org.