If questions about or requests for records subsequently arise, review §1.400.200, Records Requests, of the AICPA Code of Professional Conduct and applicable state board of accountancy rules and regulations. If deadlines are missed or a theft occurs and the CPA had not informed the client of those in writing, the client may blame the CPA firm. Copyright © 2020 CNA. If the accountant feels insulted as well as fired, he or she may slow the transition process to a new accountant. Unfortunately, some accountant would like their employer to stay in the dark about their financials, thinking this gives the accountant job security. How frequently would you like your Trusted Business Advisor/CPA to contact you?_____ 9. You may access copies of records in the portal up to this date. the end of this letter, and return the letter to this office. As of the date of this letter, our firm has no work-in-process for [Client Name]: $[XXX] remains due and payable to our firm for the [Name of service provided] for [Client Name]. This is to ensure that the financial records stay intact during the termination process. Unless the firm resigns from the CPA/client relationship while an engagement is in process, the letter should expressly state that there is no work-in-process as of the relationship termination date. I wish you well in the future. This provision may prove helpful, for example, where a client expects to work with certain employees of the CPA firm. A final billing statement may resolve any confusion and could be included as an enclosure with the termination letter. Risk is inherent to any business activity, including the sale of a CPA practice. Dear, I am writing to inform you that AAA ACCOUNTING FIRM will no longer be able to offer CLIENT accounting services. Click here to download our free New Client Welcome Letter Word Template. Former accountants oftendon’t want to do the transition work because they’re losing a client, it’stime-consuming and it’s unproductive. Time commitment of the seller to the transition. The best way to determine if the accountant is honest is for the individual to ask the accountant to teach the basics of accounting. If so, which software? “Ifthe transition is urgent, you should express why. What is Commercial Property and Liability? The CPA begins the letter with a statement of appreciation followed by her decision to end the professional relationship. When written effectively, the disengagement letter can leave clients feeling that you considered their business needs and acted in their best interests. Identifying the client: It may seem obvious, but it is critical that the engagement letter specifically address the proper client. Our services to you were comprised of the [Name of service provided] and were concluded upon delivery to you of the completed [Deliverable] on [Date][2]. When it becomes necessary to terminate a client relationship, it is important to confirm this action in a letter to the client to avoid future ambiguity regarding the status of the relationship. Matters of particular importance to include are deadlines (statutory, regulatory, or operational), internal control weaknesses or breakdowns and indicators of potential fraud or violations of laws and regulations. • The worst-case scenario is an account who is dishonest. All products and services may not be available in all states and may be subject to change without notice. Finally, consider designating in the letter an owner or firm administrator of the firm as the sole point of contact for any future communications by the client. While they are far from the most complex issue facing the profession, they can be an unexpected annoyance and involve an unnecessary drain on valuable time. The letter should be polite and formal. Be sure to research applicable state board of accountancy regulations regarding this topic as well. Client termination letter sample. The purpose of this article is to provide information, rather than advice or opinion. An example letter is included in Appendix A. If there is work-in-process, the termination letter should address the status of the firm’s work product and what, if anything, the firm will deliver to the client. Reeb suggests that firms take the following steps in managing the client transition process: Create a transition plan for each retiring partner three years before his or her retirement date, However, not all CPAs are trustworthy or efficient, and if they are not delivering these essential services accurately it may be time for the business or individual to send a letter to change accountants. Applications for an extension of time to file the 20XX U.S. federal and [State] income tax returns for [Client Name] have been filed with the taxing authorities. Timing is important in a retirement le… 6. The client addressed in this example is the owner of a small business. Here is sample text of an effective letter (edit as needed). The AICPA and CPA.com have been advising firms to reach out proactively to hard-pressed businesses and begin collecting key documents such as 2020 revenue, monthly payroll amounts, and the like. Employee Sample Retirement Letter to Clients. Phone: (734) 455-4802 Fax: (734) 455-1655 Email: info@fantcpa.com Continental Casualty Company, a member of the CNA group of insurance companies, is the underwriter of the AICPA Professional Liability Insurance Program. If applicable, include a list all of the entities or individuals with whom the relationship will be terminated. The letter should clearly map out the client's responsibilities going forward and issues that should be raised with a successor CPA. Smaller clients might only receive the letter. The relevant insurance policy provides actual terms, coverages, amounts, conditions, and exclusions for an insured. Giving clients more than one trusted point of contact can stress-proof the transition when a client-facing employee leaves. They should also consider the ongoing work and may not want to send a letter to change accountants during an in-process tax return or other serious financial issue. Copying costs will be charged at our regular rates, and are due and payable on a COD basis. However, to retain clients, make every effort to minimize as much additional change as possible. (Excel, Quickbooks, Peachtree, etc.) But that doesn’t mean clients like change. • An accountant should understand tax law, and be able to help the individual or business owner take advantage of all legal deductions. As a result, regardless of your expectations regarding collection, a termination letter should state the amount of fees due or state that a balance is not due. We appreciate your interest and wish you the best. And no partner can serve clients forever. Unless the firm resigns from the CPA/client relationship while an engagement is in process, the letter should expressly state that there is no work-in-process as of the relationship termination date. We recommend having your successor CPA obtain a Power of Attorney so that they may communicate with the IRS and state taxing authorities. When an accounting practice is sold, it is a given that the ownership will change. [Optional – If the CPA firm has an outstanding Power of Attorney for the client.]. It is not the place to show anger. We are withdrawing our Power of Attorney from the Internal Revenue Service (IRS) and [State]. For example, consider restructuring so that there’s a main point of contact with one or two other backup team members. If the accountant has a legal contract for employment, changing accountants must be done according to the terms mentioned in the contract. All rights reserved. In the event any portion of your 20XX income taxes remains unpaid, underpayment penalties and interest continue to accrue on these amounts. Why CPAs choose AICPA Identity Theft Protection, Annuities offer a wide range of benefits, Why CPAs choose AICPA Homeowners Insurance, Why CPAs choose AICPA Personal Liability Umbrella, AICPA Professional Liability Insurance Program, Why firms choose AICPA Employment Practices Liability, Why CPAs choose supplemental cyber liability endorsements, What is Business Overhead Expense (BOE) Insurance, Why CPAs choose AICPA Business Overhead Expense (BOE) Insurance. We have enclosed all of the original records provided to us for [Client Name]. It is not necessary to give a reason for the change. [1] For instructions on how to withdraw the Power of Attorney, refer to the instructions to IRS Form 2848, Power of Attorney and Declaration of Representative. For at least for the first two to three years, the buyer of a CPA practiceshould make every effo… This is why they employ an accountant. Accordingly, this article should not be viewed as a substitute for the guidance and recommendations of a retained professional. _____ 8. The letters you send to clients announcing a merger or acquisition should reassure in order to retain. No accounting firm can exist without clients. If your spouse died today, would you be prepared? In fact, many clients prefer that most aspects of the CPA firm remain the same as they were under the former owner. 239 CPA Firm Mergers & Acquisitions: How to Buy a Firm, How to Sell a Firm… Doing this is an ethical violation and may be against the law if the accountant destroys a client’s files or intentionally makes the transition process to a new accountant more difficult. In accordance with our understanding with you regarding professional services as documented in the attached engagement letter signed by you, interest is charged on unpaid fees at the rate of 1.5% per month, and remains due and payable to our firm. It is our mission to do everything possible to help you reach your business and financial goals. From the seller's perspective, minimizing the major transitional risks after selling a CPA practice should be considered as important as maximizing the sales price and terms.. A failure by the buyer or seller to execute a successful transition after the closing of the sale can be detrimental to client retention. 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Under paragraph .07 of §1.400.200 of the AICPA Code of Professional Conduct, Records Requests, a firm’s work product may be withheld if the work product is incomplete. If the CPA has power of attorney to represent or act on behalf of the client before the IRS, include your intention to withdraw from such authority in your termination letter to limit your professional responsibility to the client and the IRS.[1]. Generally, the letter should contain: An identification of the engagement to which the professional service relates. (NOTE: You may choose instead to enclose separate consent or authorization forms for the client to sign and return.) Please direct all questions to [Contact name at CPA Firm] at [phone number] or [email]. The only question is whether that someone will be in your firm or a competitor’s. A disengagement letter professionally and formally terminates the CPA-client relationship and provides CPAs with a valuable tool to reduce potential legal liability. To remain with our firm, please sign the second line at the end of this letter, and return the letter to this office. The letter will clearly state the date the retirement will start, express the desire to help with the transition and thank them for a positive working relationship. A worthy accountant will be able to explain financial statements and other financial issues in a language the business owner or individual understands. Be sure to tell the client what could happen if they do not follow up on items noted and that they will be responsible for the consequences of their inaction. create a client base, its imperative firms consider how these clients will continue to be serviced as the owners of the firm ... be retiring soon and the amount of ownership that will be in transition as a result. If there are any discrepancies, the IRS will go after the individual or business owner and not after the accountant. Re: Termination of professional services. However, not all CPAs are trustworthy or efficient, and if they are not delivering these essential services accurately it may be time for the business or individual to send a letter to change accountants. If the accountant feels insulted as well as fired, he or she may slow the transition process to a new accountant. So the rules of logic would dictate that someone else must take over serving those clients. From a risk management perspective, CPA firms should avoid providing a partially completed work product to terminated clients or the successor CPA firm. [Name of Authorized Client Representative Name]. Take a look at our sample termination letter sample to get the ball rolling. They should be able to teach simple methods that will save their client’s money. staffingpractices.soe.vt.edu While it’s entirely optional, handing out a retirement letter to your client does have its benefits. [update as necessary to mirror the firm’s billing practices as outlined in the client engagement letter], You should consult with the successor CPA firm you select as soon as possible regarding [List items that need to be addressed, any applicable due dates and the consequences of not addressing the item(s).]. An efficient accountant for a business should be able to give detailed advice for: o Leasing or buying equipmento Saving money in retirement accountso Reducing the tax burdeno Selecting good accounting software. Consultation with the AICPA or a state CPA society through available professional ethics hotlines is also recommended. Further, in the event your 20XX tax returns are not filed by the due dates, additional penalties and interest may be assessed, and you will be responsible for them. Firm-loyal client bases are not at risk to the same extent. What are your expectations of our firm? We previously returned all original records you provided to us in connection with previous engagements to you. What is Supplemental Health Insurance in Retirement? A rule of thumb is that a partner-loyal client base takes two to three years on average to properly transition. This appendix includes five sample letters for a sale or affiliation and two for a merger that firms can use to present the transition in the right light. “Also check with the clientfirst so that you know what information they have,” says Dixon. These samples suggest what to say to clients of the predecessor and successor firms: Letter to Clients of the Predecessor Firm At times, clients assert that CPAs knew they did not provide proper service because they did not bill for their time or follow-up on outstanding fees. How to Write a Business Opportunity Letter, Writing a Simple Business Plan Cover Letter for Investors, Writing a Simple Letter for a Business Transaction, Writing a Good Business Introduction Letter to New Clients, Writing a Request Letter for Training Course [with Sample], Writing a Loan Request Letter to Employer [with Sample], Writing a Shift Change Request Letter [with Samples], Writing a Letter Requesting Financial Assistance for Education [with Sample], Writing a Letter for Change of Address [with Sample]. Dear [Client Name or Authorized Client Representative Name]: As of [Date], [CPA Firm Name] (“firm,” “we,” “us,” or “our”) is terminating our professional relationship with [Client Name] or [Additional Client Names] (collectively, “you” or “your”) and will no longer render services to you. Devoting some time to drafting these letters and retaining proof that the client received the letter can help CPA firms avoid future problems with former clients. Accountants may not be regulated in all states but CPAs are. These extensions expire on [date]. I have engaged Name of Company to take over the financial accounts of my business and would appreciate it if you give all the information they require when they write to you within the next two weeks. Even if you decide to inform the client of your resignation verbally, a follow-up letter evidences the discussion. In addition, CNA does not endorse any coverages, systems, processes or protocols addressed herein unless they are produced or created by CNA. If you submit your final invoice at the end of this month as usual, I will pay it immediately. Clearly indicate the status of any client records supplied to you in connection with prior engagements, and also note your firm’s record retention policy. This is best done as a part of the regular client service. As of the date of this letter, our firm has the following work-in-process for [Client Name]: [Describe outstanding work-in-process for the client]. If they refuse to do this for whatever reason, they may not be honest. Understanding financial statements and tax codes is a skill that takes time to learn. The letter should briefly state the status of outstanding fees, even if fee collection is unlikely. Dear : Thank you for contacting us in regard to . This article is going to teach you everything that you need to know in order to create a proper retirement letter to any clients that you may want to so say goodbye to. Your NameBusiness NameAddressCity, State, Zip Code, Accountant’s NameAccountant’s AddressCity, State, Zip Code. These include the following: [Describe original client records being returned to the client], Your access to the [Client Name] and [Additional Client Names] client portals will expire on [Date]. If another accountant or firm has been employed, the accountant can be requested to send all files to them. CPAs who are Good Defensive Drivers Still need Personal Umbrella Insurance! Fort Washington, PA 19034, Choose which policy type you need to manage. Examples are for illustrative purposes only and not intended to establish any standards of care, serve as legal advice, or acknowledge any given factual situation is covered under any CNA insurance policy. Since we have grown to include online sales, it has become apparent that we need e-commerce financial advice. Michael T. Fant, CPA, P.C. We would like to sincerely thank you for choosing [companyname] to service your tax accounting needs. This information is produced and presented by CNA, which is solely responsible for its content. This minimizes the risk of miscommunication and places control over responses to requests for records. The firm can always waive the penalties for a partner who fails to meet the notice requirement but who properly transitions his or her clients before leaving. If client transition is such a logical part of accounting firm life – and Partner. Terrence Putney, CEO of Transition Advisors LLC and co-author of the book, CPA Firm Mergers & Acquisitions: How to Buy a Firm, How to Sell a Firm, and How to Make the Best Deal, says this scenario has happened and will happen again without proper planning to manage the transition of partners and their client relationships.. Carry an Umbrella. Frequently asked questions about getting life and disability insurance answered. AICPA Member Insurance Programs Contact Us. When drafting the client termination letter, keep the following in mind: When drafting your client termination letter, consider including the following components. In most engagements, the client is required to collect certain information and provide certain records to the CPA. When a person is planning to retire and he or she would like to inform their clients that they will not be working with them in the future, they need to write a formal retirement letter even if they have discussed the situation in person or over the phone. Thank you for all the assistance you provided while my business was just starting out. _____ 7. I have been very satisfied with the service I received from you, and this termination of services is in no way an expression of dissatisfaction. Client Information and Responsibilities. required by many individuals and businesses to file taxes and an analyze financials. Mailing the announcement letter in the predecessor's envelope but writing it on the successor firm's letterhead ensures the letter will be opened and sends a powerful but subtle message about the transition. We will cooperate with any successor you designate to us in writing, in accordance with the provisions of the AICPA Code of Professional Conduct. If these are not followed, the accountant or accounting firm may be able to take legal action because a breach of contract. It should state the intent to terminate the accountant’s services effective immediately upon receipt of the letter. Plan for Your Future with Life Insurance, Experience life’s ups and downs with premiums that stay the same, Why It’s Important to Name a Beneficiary. We may require payment in full of all outstanding fees owed our firm before providing these copies. Use of bullets or a table is recommended for clarity. Doing Business in the Cloud? [Optional – If client had access to firm’s electronic systems or portals.]. The letter should be polite and formal. This letter will confirm that we have not been retained to perform that service and that our firm has not agreed to render any professional services to you. A successful transition requires a profitable CPA firm and a deal that satisfies the needs of both the seller and the buyer. 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