Dos and Don'ts for Releasing Records of Deadbeat Clients

A slow economy means slow-paying clients and increased client turnover. This can add up to tough ethical questions for accountants who prepare tax returns. One especially tough dilemma arises when a former client, who hasn't paid his bill, demands that copies of all his records be provided to his new accountant.

What would you do in that situation?

Do adhere to AICPA Professional Standards, ET section 501. This standard says holding back client records after they're requested is an act discreditable to the profession.

Don't forget the guidelines change, depending on whether the engagement is complete:

  • If the engagement isn't completed, the CPA is required to return all records provided, regardless of whether or not fees have been paid. (ET section 501.01 defines client records as any accounting or other records belonging to the client and provided to the CPA by, or on behalf of, the client.)

  • If the engagement is complete, the CPA should also be prepared to provide workpapers containing information not otherwise reflected in the client's books and records. But he or she can require payment before releasing these workpapers.

Do check the rules of the applicable state board of accountancy, since these can supersede the AICPA rules. Many state boards have expanded the definition of client records to include workpapers, such as adjusting journal entries, depreciation schedules and bank reconciliations that would not otherwise be available to the client.

Footnote: Failure to return client records on a timely basis is one of the three most common complaints made against small and midsize CPA firms. The other two are failure to exercise due professional care and conflicts of interest.

You may like these other stories...

It's not a reality—yet—but accounting software is poised to eliminate accountants. We are at a tipping point for many similar professions: online education replacing professors, legal software replacing...
Inversions: Loophole Is the ProblemJacob J. Lew, the U.S. Treasury Secretary, published an opinion piece in the Wall Street Journal that "the system has become full of inefficiencies and special-interest loopholes. That...
School tax breaks get House support as Democrats objectRichard Rubin of Bloomberg reported that the House of Representatives on Thursday voted to expand and simplify tax breaks for education as Republicans continue to pass...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.