It is important to recognize , embrace and maintain your competencies . As such , it is critical that CPAs never feel compelled to dabble in practice areas outside of their expertise .
Risk Management
credit , and / or if clients later allege the firm did not appropriately advise them of the potential risk given the extended statute of limitations afforded by the IRS for assessments without a corresponding extension for taxpayers to pursue refunds on the income tax returns .
• For those clients with known extensive digital asset transactions , it may be prudent to have them sign a tax representation letter or a stand-alone comments can damage the integrity of documentation . Ask yourself whether your documentation would be helpful or harmful if presented at trial .
Additional Risk Management Tips Fees , billings and collections : The challenging economy has brought fee issues to the forefront as clients experiencing financial difficulties struggle to meet their financial commitments , including bills owed their CPAs . Good your disengagement letter should contain clear statements , a description of your work and a list of any due dates or filings . Effective disengagements are a good risk management tool for your firm and doing it skillfully and professionally will help you grow your practice and avoid potential liability exposure .
An article detailing disengaging best practices , “ The Dos and Don ’ ts of Disengaging ,” and illustrative CAMICO disengagement letters are available
It is important to recognize , embrace and maintain your competencies . As such , it is critical that CPAs never feel compelled to dabble in practice areas outside of their expertise .
certification letter at the conclusion of the engagement addressing cryptoasset implications ( these letters can be found on the Members-Only Site in the Tax Resource Center ). The additional defensive documentation provides evidence of the client ’ s understanding and acceptance of their responsibilities regarding digital asset transactions and the limitations of the services your firm provided . In addition to the above examples , there is a new area of potential risk associated with the Corporate Transparency Act , which introduces a new and expansive reporting regime for entities deemed to be Reporting Companies to report “ beneficial owner ” information to the Financial Crimes Enforcement Network ( FinCEN ).
CAMICO strongly recommends that CPA firms inform and advise their clients of the beneficial ownership reporting requirements under CTA . ( Refer to CAMICO ’ s article titled , “ Corporate Transparency Act / Beneficial Ownership Information Reporting — Risk Management Considerations for CPA Firms ”).
Written documentation should be factual , professional and without personal commentary or unsubstantiated opinions . Unprofessional and / or inappropriate communication with non-paying clients is important , and may spur payment . At the very least , contemporaneously memorialized communications create a defensive documentation trail demonstrating that the client , by not responding to your communications , did not have a valid basis to claim your fees were not owed . When dissatisfied with work , clients normally respond to such communications by detailing their dissatisfaction .
Fees , billings and collection issues can and should be managed proactively . For additional information and resources on this topic , including sample collection letters , access CAMICO ’ s Engagement Letter Resource Center on the Members- Only Site .
Disengaging : Disengagement is an art form . Skillfully handled transitions can be mutually beneficial to firms and clients . However , care is needed when disengaging from engagements after they have begun . Disengaging too late and without sufficient cause may increase the likelihood a firm could face allegations of damages if the successor is unable to meet the deadline .
Whether you decide to disengage a specific client , type of business or area of practice , it ’ s important to terminate relationships professionally , formally and in writing . At a minimum , on the Members-Only Site within the Engagement Letter Resource Center .
Early reporting of potential claim situations : Promptly report potential claims , including potential errors or omissions , to CAMICO to protect your firm ’ s full policy limits and possibly benefit from CAMICO ’ s tax penalty abatement services , which provide expertise on abatement requests .
CAMICO encourages early reporting by reducing the deductible by 50 percent , up to $ 50,000 , for any potential claim that is reported before a claim is made . Further , if CAMICO determines that it is appropriate to retain counsel to assist with a potential claim , the related expenses preceding a claim will be absorbed by CAMICO and not impact policy limits or charged to the deductible .
Subpoena and consultation services are included in these potential claim benefits . Early reporting helps our claims specialists achieve effective resolutions and mitigate the impact of errors and omissions .
Suzanne M . Holl , CPA , is senior vice president of Loss Prevention Services with CAMICO . CAMICO policyholders with questions regarding this article or other risk management topics should contact the Loss Prevention department at lp @ camico . com or call ( 800 ) 652-1772 .
18 CALIFORNIA CPA NOVEMBER 2024 www . calcpa . org