By Duncan B. Will, CPA, ABV, CFF

The CPA profession is experiencing a diminishing workforce. Whether you want to assign the root cause to the "great resignation," the "great reassessment," or the "baby boomer departure," it really doesn’t matter where the rubber meets the road. You still have to cope with innumerable IRS issues, handle a variety of COVID relief programs, and deal with the constant stress of limited resources and elevated client demands.

As you reflect on the busy season you just traversed, if you are like many CPAs you may be identifying the stressors in your life, maybe even identifying specific issues or clients you wish were no longer along for the ride. Do not let the passage of time numb you to the frustrations you experience. Now, post tax season, is the time to make a clean break and dismiss a select set of troublesome clients. Now is the time to explore disengaging.

Identify the Problems

Undesirable personalities aren't the only reason to terminate clients. Also consider disengaging when you encounter the following:

• The client fails to pay or is slow to pay.
• The relationship has deteriorated or you no longer possess the competence or capacity to perform the services sought.
• Risks outweigh rewards, or if there is a conflict of interest.
• Independence (on attest services) is threatened or impaired.

Once you realize a client relationship should end, take a moment to do it right. Disengage in writing, but only after you have laid the groundwork.

Communicate Clearly  

Don't surprise a client you plan to terminate with a letter informing them of your decision. It may be uncomfortable, but start off by talking to them. Recognize that it may be painful, but a good-natured touch will typically smooth the transition. But don’t just drop the mic: explain your reasoning, listen, and be empathetic. You do excellent work, you have been a constant in their lives, and the change will likely not be welcomed as they won’t want to lose you. So, expect an emotional appeal, but stick to your guns. When all is said and done, though, make it “official.”

Disengage in Writing

Shortly after your disengagement conversation, memorialize your discussion with a "tweaked version" of your disengagement letter. Yes, you've already had the difficult discussion, but your responsibility is not complete until you finish the paperwork. It’s best to expeditiously communicate your decision, but you need defensive documentation of your client receiving your disengagement communique.

Email can be the solution if your client promptly replies to emails. A client's response acknowledging receipt eliminates the need to obtain proof of delivery from a delivery service. Use your understanding of the client to best gauge how to obtain that defensive documentation. While email is the fastest alternative, some clients find email too informal and may not reply. If that’s the case, send a disengagement notification to your client via a method that provides a return receipt or other proof of delivery. Certified mail historically has been the preferred mechanism, but some parties (expecting news they don’t wish to accept) decline to sign an acknowledging receipt. There are other methods that provide proof of delivery, so you will have to judge the best way to get this document delivered and verified.

Include Your Last Date of Service

As you close things down, specifically date the end of the engagement. Don't be ambiguous. State the last date of service. Nine times out of 10, it would be best to disengage and have no further client expectations. Ideally, you would have collected on the last item you agreed to deliver, and then promptly disengaged. Often, though, you are peppered with requests, your client is slow to pay, and it becomes necessary to disengage with work in process or on the horizon. If that’s the case, state that the most recent deliverable was your last or penultimate service to be rendered.

Work Status/Pending Due Dates

Despite leaving the stage, you will be dragged back if you don't take the time to state the status of services you were performing and detail the due dates of items on the horizon, regardless of whether you had formally been engaged to perform those services. Why? Because if you don’t and your client or your successor makes a mistake, you may be blamed for their oversight. Smoothing the transition reduces the likelihood of ruffled feathers that might result in allegations you were negligent.

Account Balance Status

Outstanding invoices and work in progress are common when accountants disengage. Collecting these fees may prove problematic. Make sure you detail amounts owed to you in your disengagement letter, attach copies of the invoices, and state "Your prompt payment will be appreciated" to significantly increase the likelihood that you will get paid. Pointing out the amounts owed may also provide psychological leverage against a client’s unreasonable demands and expectations.

Encourage Retaining a New CPA ASAP

Be sure to encourage the clients you broke with to secure the services of another CPA as soon as practicable. Doing so is great advice, an act of courtesy, and an excellent defensive measure. The sooner a former clients establishes a relationship with your successor, the greater the likelihood that any ill will dissipates, and their accounting and other professional needs are timely met.

Occasionally, CPAs are tempted to provide terminated clients with the name of someone to consider as a successor. Do not do this. Instead, if wishing to offer referrals, provide two names or more and encourage the former client to perform their own due diligence. The suggestion of one, and only one, person exposes you to liability should the former client later allege your successor didn’t meet the standard of care.

Cooperation with Successor

The sooner and smoother the transition to your successor, the better it is for you and your former client. As such, it’s typically best to make an offer within your disengagement letter to “cooperate as necessary” with your successor. This offer of cooperation doesn't indicate that you will bend over backward or donate your time. Rather, your cooperation will be contingent on factors that need not (and should not) be specified in your disengagement letter.

If transition assistance is requested by the ex-client, first obtain written authorization from them to speak openly and share information with the specified professional(s). Second, secure the successor’s signed agreement to the terms of your cooperation. Lastly, consider leveraging your cooperation pending payment of your outstanding fees and possibly a retainer to cover the anticipated cost of your cooperation. However, keep in mind that the AICPA prohibits its members from withholding client-provided records,¹ and your state board of accountancy may prohibit withholding records, even if fees are owed for work you have performed.

Disposition of All Client Records

CPAs are often tempted to enclose client records in the same envelope they send their disengagement letter. This is not a good idea. Clients have been known to allege they did not receive the CPA's disengagement letter. Problems are then compounded if client records are “lost.”

Instead, when you converse with the client (or in the disengagement letter) ask how they wish for you to provide them with the records they desire. And just to be safe, retain copies for your records of any records returned.

Consider Sending Your Letter to Multiple Parties

If concerned that certain owners or those charged with governance will not hear of your disengagement or your reasons for disengaging, consider the “noisy disengagement” option. Noisy disengagement letters are identical to traditional disengagement letters but are addressed to the parties you are concerned might not promptly learn of your disengagement or reasoning. Be cognizant of the AICPA’s Confidential Client Information Rule,² which prohibits accountants in public practice from disclosing confidential client information without client consent. Sharing a disengagement letter with owners or those charged with governance typically would not violate the rule, but be careful not to inadvertently violate it when wishing to alert others that you terminated the relationship.

Be Professional – Leave Emotion Out of It  

It can be cathartic to colorfully detail your reasons for disengaging, but be mindful that openness can have consequences. Experience has shown that letting clients down easy typically results in the quickest and least eventful parting of ways. Having a right to do something doesn’t make it the right thing to do.

¹ ET 1.400.200, Record Requests
² ET 1.700.001

Duncan B. Will, CPA, ABV, CFF, is loss prevention manager, accounting and auditing specialist, with CAMICO. CAMICO loss prevention specialists have helped draft tens of thousands of disengagement letters. He can be reached at dwill@camico.com.

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of the PICPA's officers or members. The information contained herein does not constitute accounting, legal, or professional advice. For actionable advice, you must engage or consult with a qualified professional.