NAPLIA's Professional Liability Blog / Resources / Articles

VIDEO:  Turbocharge your Engagement Letter with John Raspante

Posted by Gary Sutherland on Wed, Mar 02, 2016 @ 02:07 PM

John Raspante of NAPLIA explains how engagement letters can market additional services, limit liability, and help with dispute resolution.

Watch the video on the Accounting Today website.

Visit engagementletters.com for sample CPA firm engagement letters.

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Tags: risk management, engagement letters, cpa

VIDEO:  Engagement Letters as a Life Preserver with Stephen Vono

Posted by Gary Sutherland on Wed, Mar 02, 2016 @ 01:24 PM

Stephen Vono, Partner, NAPLIA was interviewed by Accounting Today on the importance of Engagement Letters for CPA firms.

Watch the video on the Accounting Today website.

For sample engagement letters, visit engagementletters.com.

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Tags: cpas, risk management, engagement letters

Find sample engagement letters at NAPLIA's newly relaunched website

Posted by Alexandra Swan on Wed, Apr 10, 2013 @ 12:41 PM

NAPLIA has partnered with leading legal professionals for the development of sample engagement letters that are essential to your practice as well as articles and resources for your company's risk management.

http://www.engagementletters.com

Tags: accountants, Sample, engagement letter, engagement letters

Massachusetts Supreme Court holds that limitation periods may be shortened by contract

Posted by Tom Henell on Tue, Dec 11, 2012 @ 10:19 AM

Creative Playthings Franchising, Corp v. James A. Reiser, Jr., 463 Mass. 758 (2012)

The Supreme Judicial Court, Suffolk County, Duffly, J., held that limitations period in a contract shortening the time within which claims must be brought was valid and enforceable under Massachusetts law, under certain conditions. A limitations period in a contract shortening the time within which claims must be brought is valid and enforceable under Massachusetts law, if the claim arises under the contract, and the agreed-upon limitations period is subject to negotiation by the parties, is not otherwise limited by controlling statute, is reasonable, is not a statute of repose, and is not contrary to public policy.

Nancy Reimer, attorney for LeClairRyan of Boston, stresses the relevance of this ruling for CPA's. Attorney Reimer suggests Accounts include a provision in their engagement letters limiting the time in which a claim can be brought to 2 years, or less depending on the circumstances of the engagement. Reimer stated, "We typically include clauses like this in letters we draft and have not had any issues with them, but now we have a definitive ruling from the SJC as to their validity."

Reimer further clarified that contract limitations are determined on a state by state basis.  Although this ruling is great for Massachusetts, not all states concur.  Florida, for example, has a statute stating a party can not limit the SOL period.

Tags: accountants, cpas, engagement letter, engagement letters

Retention of Client Records - Sample policy & FAQ's

Posted by Tom Henell on Fri, Jan 27, 2012 @ 11:01 AM

Concern about how long engagement files should be retained is a common issue among Accounting firms.  There is frequently a conflict between the desire to discard older files to free up storage space, and the inherent reluctance to discard documents which contain a detailed record of the work which you have performed. 

There are very few rules established in law for file retention by accountants.  However, this information is intended to help provide some guidance in developing internal record retention standards for your firm.

Read More - Including Sample File Retention Policy and Receipt for Client Records

File Retention - FAQ's

Tags: accountants, cpas, file retention, engagement letters

Suits for Fees - ways to avoid them and the liability they create

Posted by Tom Henell on Mon, Apr 25, 2011 @ 03:30 PM

You’ve provided professional services for your client, delivered the work product, sent them a bill for your services, and…nothing. What do you do?

Collecting fees is a critical and often difficult part of your practice, and one which raises one of the most frequent and serious questions to our risk management hotline; Should I pursue litigation to collect my outstanding fees?

Proactively taking steps to reduce the potential for unpaid fees is your best defense to avoiding potential suit for fees. There are basic billing practices which, when implemented regularly and effectively, can dramatically reduce the number of collection problems your office will face.

Read more about the specific ways to avoid the liability created by suing your client for fees.

Tags: accountants, cpas, professional liability, engagement letters, suit for fees

Negative Engagement Letters

Posted by Tom Henell on Tue, Mar 08, 2011 @ 01:41 PM

We regularly hear from accountants who ask about the effectiveness, and enforceability, of “negative engagement letters”.

A Negative Engagement letter is one that includes wording that indicates even if the client does not sign the letter, certain action taken by the client (submission of tax returns) will be deemed as acceptance of the engagement letter terms.

We spoke with Ralph Picardi, Esq, specialists in Accountants Professional Liability, and received the following insight on negative engagement letters.

A signed engagement letter is by far the best course of action in any engagement.  By obtaining the client’s signature on an engagement letter, the firm creates a clear contract with the client including all of the important terms of the engagement.  Most firms, however, have a very difficult time receiving back completed organizers and sufficient source documentation, let alone signed engagement letters in 1040 engagements. 

To address that concern, many firms have opted for negative letters, i.e., letters that do not require a signature.  They can take many forms.  Attorney Picardi clarified that every state recognizes that contracts can be formed by something other than a signed writing.  Oral contracts and those formed by actions are examples.  In the absence of a state law requiring a signed writing (and you should check this with local counsel), the reasonableness of the communication will probably control the matter if litigation ultimately ensues. 

Attorney Picardi further recommends the following approach.  The firm should continue to style its engagement letter to be signed by the client, but should also include language that purports to make the terms of the letter binding even in the absence of a client signature.  Example language would be as follows: 

If you agree to authorize this firm to prepare your 200_ personal income tax returns pursuant to the terms set forth above, please execute this letter on the line below designated for your signature, and return the original of this executed letter to this office along with a completed copy of the enclosed tax organizer and the supporting documentation requested therein.  You should keep a copy of this fully executed letter for your records.  If this firm does not receive from you the original of this letter, in fully executed form, but receives from you a completed copy of the enclosed tax organizer and/or supporting documentation requested therein, then such receipt by this office shall be deemed to evidence your acceptance of all of the terms set forth above.  If, however, this office receives from you no response to this letter, then this office will not proceed to provide you with any professional services, and will not prepare your 200_ income tax returns.

Negative engagement letters may not be the best, but they are useful and are certainly recommended over no engagement letter at all.

For more information, visit NAPLIA's dedicated website to engagement letter education,

www.cpaengagementletters.com

Tags: accountants, cpas, engagement letters

Engagement Letters and Tax Services

Posted by Tom Henell on Wed, Dec 29, 2010 @ 04:19 PM

As the New Year approaches so does Tax Season for our CPA clients.  One of the consistent issues that arise for CPA’s at this time of the year is the question of utilizing engagement letters for tax clients.  Some CPA’s feel that requesting their tax clients to sign engagement letters is burdensome and may appear ominous to some clients. 

From a Risk Management standpoint, it is our recommendation that engagement letters should be utilized for all services, including tax work.  Tax services still account for the highest frequency of professional liability claims against accountants.  And, an engagement letter is can be an important element of defense in the event of a claim against you.

Of course, the engagement letter should be in proportion to the services provided, but it is more than simply a fee agreement.  An engagement letter will identify not only the services that you are providing, but sometimes more importantly the services you are not providing (“We will not audit or otherwise verify the data you submit.”).  Keep in mind, this may be an opportunity for you to market and advise your clients of additional services you can be providing them.

In the worst case, consider using a “negative engagement letter” for 1040 clients.  A Negative Engagement letter is one that includes wording that indicates even if the client does not sign the letter, certain action taken by the client (submission of tax returns) will be deemed as acceptance of the engagement letter terms.

For more information on engagement letters including sample letters, and more on negative engagement letters visit our dedicated website, www.cpaengagementletters.com

Tags: accountants, engagement letters