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?

An article in the August issue of the Journal of Accountancy entitled An Ethics Quiz provides some suggestions:

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.

The article cites failure to return client records on a timely basis as 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...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Already a member? log in here.

Upcoming CPE Webinars

Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.