A Proactive Approach to Disengaging

By Suzanne M. Holl

CPAs periodically enounter situations and client relationships that call for disengaging—a practice management process that can increase CPA firm profitability and create better situations for CPAs and clients.

Camico’s claims files indicate that 85 percent of all claims made against CPAs are brought about by the clients (as opposed to third parties). Generally, clients are expecting broader services at a time when CPAs are becoming more specialized. When clients expect more from a CPA firm than the firm can provide, an “expectation gap” develops, leading to situations in which claims occur and client-CPA relationships deteriorate.

A disengagement seeks to formally terminate the CPA-client relationship in a mutually beneficial way, freeing each party to pursue other professional ties. The CPA has more time to focus on more suitable clients and prospective clients, and the former client is free to find a successor CPA who will better meet his or her needs.

Proactive Disengagement

A proactive approach to disengaging requires the CPA firm to evaluate and re-evaluate its clients on an annual or semi-annual basis. This enables the firm to better monitor clients, note any changes that might affect the professional relationship, and avoid situations that could escalate into crises.

Carefully consider any client changes that can create problems. If the CPA firm is not professionally staffed or qualified to perform the additional services a client requires, and the firm attempts to perform the services rather than disengage, the firm may become more vulnerable to litigation.

Evaluating clients and gaining a better understanding of their changing needs also enables the CPA firm to consider offering services that better complement those needs, assuming the firm has the required expertise. The firm can also explore different options to best serve the client, such as a collegial alliance with another accounting firm that specializes in another area.

Pay Attention to Difficult Clients

When evaluating clients, pay special attention to difficult or manipulative behavior, such as consistently delinquent payments, and take swift action. The following checklist of questions is intended to help get to the heart of the matter and solve problems:

• What is causing the problem?
• Who is causing the problem?
• Does the client’s behavior indicate that there is a problem with the service provided?
• Is the firm dealing with a manipulative client?
• Is the problem due to a personality conflict?
• Could someone else better serve the client?
• When did the firm first realize it had a problem with the client?
• What was the tip-off? An unpaid bill? A change in attitude?
• Is the firm allowing emotional ties to overshadow professional concerns?

Problematic client behavior may be a reaction to something done months ago but still bothering the client.

Additional questions to consider include:

• What can your firm do to better communicate with the client?
• Does the client feel the fees charged by your firm are too high?
• Was a new staff member assigned to the engagement?
• Is the client suffering a business or personal hardship?
• Is your firm’s billing method clear?

Dealing right away with difficult behavior may save the relationship and help the firm avoid disengagement, or it may confirm that it is time to sever the relationship.

When the firm decides to disengage, terminate the relationship professionally and formally, in writing. At a minimum, the disengagement letter should always contain the following:

• A clear statement that you are disengaging and the effective date of the disengagement (e.g., “We must formally end our relationship with you as your accounting firm effective immediately” or “as of (date).”)
• A description of any work that is in process or unfinished
• A statement of any due dates or filing deadlines that exist with regard to the work, whether finished, in process or unfinished.

Review and edit the letter carefully to ensure that it is professional, objective and rational. Don’t let it reflect personal feelings. When done effectively, a disengagement can leave your clients feeling that you have acted in their best interests.

Engagements that include audit, review or compilation services require special attention. Such engagements are often used by clients for obtaining financing or satisfying loan covenants, and disengaging while in process can cause potentially negative effects.

Tax preparation engagements also require special attention. Ideally, the CPA firm should disengage after completing its work for the client. When the CPA disengages before completion, a successor CPA may be unable to finish by the deadline, causing missed opportunities or damage to the client’s business. CPAs should be aware of this exposure and should not wait until the last minute to disengage.

Even the most proactive and well-managed evaluation and disengagement procedures may need to be bypassed because of critical situations, such as the discovery of fraudulent activity. When in doubt, call a qualified risk adviser or legal counsel for guidance.