Professional Responsibilities: Due Care

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Due care is the fifth principle of CPAs’ code of professional conduct. Knowledge and diligence are common components of due care. Performing professional engagements that require expertise or time that a CPA does not possess violates the principle of due care. How due care is practiced also differs with the nature of the professional service.

Professional Services

Due care involves acting for someone else’s benefit or to someone else’s specifications. CPAs frequently perform tax and consulting services for specific clients whose requirements or specifications can be known in great detail. Knowledge of these requirements and the relevant subject matter, along with diligence and thoroughness in fulfilling the engagement, provides these clients the due care required by the standard. The nature of due care can vary considerably depending upon the degree to which the service is specialized or personalized. The more personalized the service, the harder it becomes to apply across-the-board practices. Client satisfaction is the most meaningful assessment of due care for such services.

In contrast, because CPAs rarely know exactly who will be the ultimate user of their audits, reviews, and attestations, due care consists of exercising diligence in following the appropriate professional standards. Knowledge of the appropriate professional standards and diligence in following them are the bases for ensuring due care for these core CPA services. Because professional standards, not client specifications, constitute the base for these services, it is extremely important that engagement letters provide sufficient detail about the services. It’s not necessary to detail all the relevant standards in the engagement letter, but clients should understand that, for certain engagements (usually those requiring independence), due care involves satisfying the professional standards rather than fulfilling the client’s wishes. For these services, other knowledgeable and experienced CPAs become the assessor of due care. Good quality-control systems, second reviews, and aggressive professional education, as well as effective peer reviews, are the current building blocks for exercising due care for these services.

Due care can also be interpreted to mean the knowledge and diligence to satisfy the expectations of a “reasonable” person. CPAs encounter this aspect of their due care standard whenever legal due diligence is called for. This usage of “due” differs from the first two because it refers to a minimum legal standard rather than a personal or professional technical standard. This standard of due care can also be superimposed on any service provided by a CPA whenever the quality of the CPA’s service comes into question in a legal dispute.

Knowledge. Due care requires that CPAs have adequate technical knowledge to professionally perform the engagements they accept. The rules section of the Code of Professional Conduct permits CPAs to accept engagements without possessing completely the necessary technical expertise as long as the expertise is acquired before the engagement starts. Many failures in due care recorded in ethics cases reflect CPAs’ reluctance to turn down engagements for new services and their subsequent inability to obtain sufficient technical expertise to perform them properly.

Because so much of the technical expertise required in CPA practice arises from experience while supervised in a firm rather than from formal education, it can be difficult for CPAs to master new technical areas unless that expertise already exists at their employer, especially as compared to other professions. For example, doctors generally attend classes at a certifying teaching hospital before offering a new medical procedure. CPAs, on the other hand, generally do not have access to such formal educational opportunities in new service areas.

Diligence. CPAs’ due care standard also requires diligence in the performance of the service, making certain there are adequate time and resources, as well as making sufficient effort to perform the service to the client’s satisfaction or to the level of professional technical standards. Frequently, in a firm setting, diligence also addresses adequately training, supervising, and evaluating staff members and their work. CPAs have developed many practice aids, notably checklists, to remind themselves of all the different tasks required to complete engagements with due care.

Quality Enhancement

CPAs’ due care standard lies behind the commitment of the profession to continuing professional education and various quality-monitoring programs, including peer review. Peer review provides incentives and opportunities for CPAs to enhance the quality of their work, ensure that they satisfy their ethical responsibility to practice with due care, and demonstrate their quality to the public.

Robert H. Colson, PhD, CPA
Editor-in-Chief
rhcolson@nysscpa.org