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Now is a Good Time to Re-Evaluate Clients

Many CPAs are still catching their breath after what may arguably be one of the more difficult tax seasons. It goes without saying that the Tax Cuts and Jobs Act (TCJA) which passed into law on December 22, 2017, (Pub. L. 115–97) was a “game changer” for the profession. Tax professionals have been tasked not only with the steep learning curve as it relates to the provisions of the new law, but also with the added burden of having to educate clients on the law’s nuances that were of impact to their own unique tax situations.

As we know, TCJA benefitted many taxpayers, but also disadvantaged many others, and some of your clients may have been on the receiving end of those disadvantages. Needless to say, some clients rose to the occasion better than others with respect to responding to the implications of TCJA to their own specific fact patterns. Those clients that were difficult to deal with during tax season may not improve with time and, therefore, can create complications that may cause more headaches and risk than the firm wants to accept. Identifying those clients post-tax season provides ample time for the client to find a new professional and provide for a smooth transition in the event that you decide to disengage.

For example, it is likely that the fees the firm billed to clients were higher this year than in the past given the issues with TCJA compliance. If those increased fees created tension and/or pushback by some clients, that may be a red flag for the firm. Now may be a good time to evaluate those particular relationships to decide if these clients are the right fit going forward for your firm. In addition, if you had clients that reacted in an unusually aggressive or inappropriate manner when presented with the firm’s work product, suggesting that they couldn’t possibly owe that much in taxes, you may also want to consider if those clients are still the right fit for the firm.

From a timing perspective, there is no better time than NOW, post-tax season, to review your client list and decide what clients are the right fit for the firm going forward. Disengaging from those clients that do not meet that threshold—ideally after they have paid their bills—will position you well for the future.

The following checklist highlights some additional warning signs from CAMICO’s perspective of potential problem clients that could present elevated risk to the firm if not managed appropriately:

Late/Slow Payment

Does the client pay your firm on time? If not, find the reason for the payment problem and decide whether or not you want to retain the client.

Client Is Difficult and Uncooperative

Pay special attention to difficult or manipulative clients who do not provide the information you request, do not return your phone calls, are otherwise non-responsive, and often cause delays. Difficult behavior should not be ignored; it should be explored. Take swift action to investigate.

Difficulty Obtaining Information

When a client seems unwilling to provide you with the information you need to complete an engagement, you should carefully consider the problem. Is the problem sloppy record keeping, or is the client deliberately delaying or withholding information? Be cautious in any situation where it appears that documents are being deliberately withheld, or you are urged by a client to proceed with work without having proper documentation. For example, you discover a client is borrowing money from his/her business and he/she assures you that the other partners are aware of loans. When you request a new partnership agreement that reflects the loan arrangement, the client stalls or urges you to release financials or accounting work without it. Client behavior such as this is a red flag, and repeated delays could be the result of unethical or illegal activity.

Potential Conflict of Interest

Consider all client situations carefully in an effort to spot potential conflicts of interest, which may affect your objectivity or independence—even if you are not engaged to do attestation work. It’s important to examine potential or actual conflicts of interest from a broad point of view, considering the client’s perspective as well as those of other owners, investors, partners, beneficiaries, spouses, etc. Unfortunately, very often the bottom line is perception.

Troublesome or emotionally charged scenarios can include a partnership break-up, a trust, bankruptcy, merger, divorce, or anything else that involves opposing or unhappy factions. When a client of yours dissolves a partnership or files for divorce, you may feel compelled to disengage from one or both parties to avoid a potential or actual conflict of interest. It can be difficult to continue preparing tax returns for a divorcing couple, for example, since each spouse could accuse you of preparing the return in a manner more favorable to the other spouse. It can also be difficult for you to continue working with two former partners after dissolution, especially if the partners were not on amicable terms.

It is always a good idea to examine the potential for conflict prior to accepting an emotionally charged engagement. If potential conflicts are identified, you should assess whether there are reasonable safeguards to eliminate the threat or reduce the threat to an acceptable level. And if there aren’t, we recommend disengaging from one or both parties.

Deteriorating Relationship with Client

A deteriorating relationship with a client could be a sign of impending liability problems. Abrupt changes in a client’s behavior may be an indication of his/her failing business, financial problems, substance abuse, or other personal problems. Trying to uncover the source of the problem could be beneficial, but whatever you do, don’t ignore the warning signs of a deteriorating relationship.

If a client continually fails to return your phone calls or threatens to sue you if you don’t do what he/she asks, you should take swift action to remedy the situation or disengage before the situation worsens.

The “Antacid” Client

Some clients may be great for your firm’s financial condition, but the money they bring in simply isn’t worth the emotional turmoil they create among you and your staff. These are the clients who are rude to your staff, make unreasonable demands, are non-responsive, complain excessively, argue, and are generally difficult to work with. In these cases, you have to ask yourself: Is this client worth keeping? Sometimes, the answer is that “life is too short” to deal with people like this!

In addition to being alert to these warning signs, protect yourself further by educating your clients on their responsibilities within the relationship. Let them know what your responsibilities are to them and what they can expect. The use of well-crafted engagement letters that detail the scope and limits of the services you are providing is a good starting point for educating your clients. Be sure to visit CAMICO’s Engagement Letter Resource Center, located under “Resource Centers” on the CAMICO Members-Only Site, for tools and checklists that provide step-by-step guidance through the engagement letter–writing process. The resource center also includes links to 100+ sample engagement letters.

In addition, keep notes and document conversations, meetings, requests for information, decisions, and any payment problems or changes in a client’s behavior. Documentation could be an important part of deciding whether or not to disengage.


If and when you decide to disengage, seek to terminate the relationship professionally and formally, in writing. At a minimum, your disengagement letter should always contain clear statements, a description of your work, and a list of any due dates or filings.

Review and edit the letter carefully to ensure that it is professional, objective, and rational. Don’t let it reflect personal feelings. Send the letter on a timely basis so that the client is not left with a deadline that cannot be reasonably met by going to another CPA. When done effectively, a disengagement can leave your client feeling like you have acted in the best interest of both parties.

In the end, disengaging is simply good practice management, and knowing how to do it skillfully and professionally will serve to help you grow your practice and avoid liability.

CAMICO provides sample disengagement letters, which are available on the Members-Only Site on the Engagement Letter Resource Center.

CAMICO policyholders with questions regarding this article or other risk management questions should contact the Loss Prevention department at

, or call our advice hotline at 800.652.1772 / 650.378.6800 and ask to speak with a Loss Prevention Specialist.

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