Dealing with the occasional difficult client is an unpleasant, but inevitable, experience for all accountants. Clients who chronically complain, argue with you or your staff, delay turning over necessary information, or fail to follow advice – the list of potential problem clients is long, and chances are, with busy season barely in your rear-view mirror, one or two of your own trying clients easily come to mind.
Now that you have the time, you may want to evaluate just how troubling some of your most troublesome clients may be. Is the situation bad enough to consider disengaging with that client? Not always – yet there are some reasons and signals that may convince you to terminate the relationship.
Here, CPA Mutual, one of the leading US providers of professional liability insurance and risk management consulting to CPA firms, highlights some of the legal reasons – and red flags – that could warrant breaking up with a client. Once the decision is made, CPA Mutual officials say, the main challenges are when and how to do it.
Risk of Unsupported Tax Positions
In the course of serving a client, an accountant may discover errors on previous returns or errors when providing other non-tax-related services. It is a professional duty in some cases (and, otherwise, a natural courtesy) to let the client know about the error and recommend ways to correct it, according to CPA Mutual.
Although the client may not be required by statute to correct an error by filing an amended return, the client’s decision not to file or otherwise correct an error should send a signal to the accountant of potential trouble.
“It may predict future behavior in which the client asks the accountant to take an unsupported or aggressive tax position,” said CPA Mutual President William “Bill” Thompson, CPA, RPLU. “At that point, the accountant needs to seriously consider withdrawal from the engagement and potentially the professional relationship.”
Conflicts of Interest Risks
According to Thompson, conflicts of interest in the course of performing tax work exist if one or more conditions are met: representation of one client before the IRS will be directly adverse to another client, or there is a significant risk that the practitioner’s ability to successfully represent the client will be limited by responsibilities to another client, a third party, or a personal interest.