What should I do if my client leaves?
When a client tells you they are moving to a new accountant, it can come as a surprise. Here we set out five steps you should take to ensure you meet your professional and ethical obligations.
Consult the Code of Ethics
The relevant sections on changes in professional appointment are in Section 320 of the ICAS Code of Ethics. We also have a supplementary helpsheet which contains further guidance for outgoing and incoming accountants.
Issue a disengagement letter
It is important that there is no misunderstanding about what work has been completed and what remains outstanding for the client or their new accountant to deal with. A disengagement letter can be used to summarise responsibilities with the client during the handover between your firm and the new accountant. It can also be useful for clarifying practical matters like the return of the client records and payment of outstanding fees. A style letter can be found in our disengagement helpsheet and checklist.
Respond to requests from the new accountant
These usually fall into two types:
(1) a request to disclose any issue or circumstance which might be relevant to the new accountant’s decision to accept or decline the appointment (otherwise known as an enquiry letter), and
(2) a request for the transfer of client records. Assuming you have the client’s permission to respond, you must answer all such requests promptly, and provide any information ‘honestly and unambiguously’. Any matters the new accountant should know about should be communicated to them – but stick to the facts and avoid unsubstantiated speculation. You should not divulge any suspicious activity reports relating to money laundering or terrorist financing or make other disclosures that could amount to tipping off.
Sometimes questions arise over what documents or records the new accountant is entitled to. Generally speaking, unless a lien is being exercised (see below), and assuming the client consents to it, the new accountant is entitled to be given any documents which belong to the client. However, the rules around document ownership are not straightforward. It can depend on factors such as whether the document was originally prepared for the client or prepared by you for your own (or your firm’s) use. Our helpsheet on document and file retention contains further guidance on this subject, and lists categories of records which typically belong to the client or the accountant.
There might be situations where the new accountant asks you for information which is contained in records that do not belong to the client but is necessary for the continuation of services and, without it, the client’s interests would be prejudiced. In such situations, you might decide it is efficient to provide summary documents such as lead schedules rather than the full working papers which belong to you/your firm. More guidance on this subject is contained in our helpsheet on documents and file access rights.
Investigate complaints
Although there could be many reasons why a client decides to leave, if they complain about being unhappy with your services you have a duty under the Investigation Regulations to investigate it - and, if their complaint is justified, take steps to resolve it. If they are still not satisfied, you must notify the client in writing of their right to submit a complaint to ICAS. More information on complaints is available in the regulation section of our website. It is never easy to hear about client dissatisfaction, but it can give you an insight into what went wrong and help avoid similar issues arising with other clients in the future.
Unpaid fees?
You are entitled to mention unpaid fees to the new accountant, and you may have the right to withhold records belonging to the client until the fees are paid. This is known as exercising a right of lien. A lien can only be exercised in specific circumstances. In particular, it cannot be exercised over the books and records of a company client, nor can it be exercised where an insolvency practitioner requests documents belonging to the insolvent company. More information is available in our lien helpsheet. As lien is a legal right, we recommend you take legal advice if you are in any doubt about your right to withhold information.
Even if you are satisfied that you have a valid legal right to exercise the lien, you should take steps to try to resolve any dispute with the client over the unpaid fees.
Further advice is available from our Practice team or through our ethical enquiries helpline. both of whom can be contacted through the Technical Helpdesk portal.