Let your new CPA assist with the information request. Also keep in mind that non-compete agreements have tax consequences. This could cause financial and/or reputational harm to the client and might result in them taking legal action against the predecessor firm. The additional guidance to Rule 302 is as follows: Such incorrect assumptions can prove detrimental to establishing the preliminary footing necessary for good relationships to materialize for the buyer. firm began its professional practice in 1972. The purpose of this article is to provide information, rather than advice or opinion. THIS IS A CONFIDENTIAL SERVICE. Appendix A - Termination Letter Example [ Date] A good transition should not involve clients jumping through hoops to benefit from the buyer's services. A letter is one of the best ways to terminate the relationship/engagement with a client in a professional fashion. Use by any person other than the addressee is prohibited. Due diligence when buying a CPA firm tends to happen fairly quickly after a deal is struck. initial][last name]@abccpa.com. 388 0 obj <>/Filter/FlateDecode/ID[<67F132C1633BFA4487199F425A3D696A>]/Index[375 20]/Info 374 0 R/Length 72/Prev 26835/Root 376 0 R/Size 395/Type/XRef/W[1 2 1]>>stream It is imperative to make certain that the nature of the announcement corresponds with the legal structure of the transaction. Search for more papers by this author. Furthermore, this letter will assist you in responding to the successor accountant when you receive the courtesy letter. Approximately half of our transactions are sold with 100% cash at closing, while approximately 90% of our transactions have fixed-price structures, leaving only about 10% with any contingencies. The predecessor firm should maintain control over the original data files, and release only backup files that are locked from editing, i.e., read only. In most instances, the recommended method of transferring the requested files is for the predecessor firm to maintain possession of the original files and to provide copies to the successor firm. continue the tradition we have for excellent service, deep XYZ information for us will remain the same except our e-mail addresses If you are. By implementing some formal procedures, including a written communication to your client, you can avoid misunderstandings and ease the transition to your successor. The growth Do not lose sight of the fact that clients are people. If the predecessor firm decides to release either the original working papers or electronic backup copies to the successor firm, the predecessor firm should take steps to maintain the integrity of its working paper files by maintaining its own copies. Assuming that a qualified buyer has the capacity and a deal structure that provides incentive for buyer performance, the following is a list of things that buyers can do to retain clients after the purchase of a CPA practice: The seller of an accounting practice should be prepared to help a buyer for at least the first few weeks or months of the transition and to be available for occasional phone calls afterward. Home sharing and your insurance: What you need to know, How to keep your valuables safe from harm. We refer you to Rule 302 in the CPABC Code of Professional Conduct, Communication with predecessor: A registrant (successor) shall not accept an engagement with respect to the practice of public accounting or the provision of a professional service not inconsistent therewith, where the successor is replacing another registrant or other professional (predecessor), without first communicating with such predecessor and enquiring whether there are any circumstances that should be taken into account which might influence the decision whether or not to accept the engagement. By Accountants Professional Liability Risk Control, CNA, 333 South Wabash Avenue, 39S, Chicago, IL 60604. In connection with this transaction, Mr. XXXX will be terminating his employment relationship with our firm. Employee & Cybercriminal Theft: Should CPAs be Concerned? All the contact formId: "e8eff37c-bf0c-496f-932d-1eab6fc37591", Explain that the buyer will begin taking the reins of the firm while the seller begins to reduce his or her involvement. Your source for the latest Canadian tax news and updates on changing tax laws. Reg. that a larger organization will allow us to provide a wider array of They also will return original files as requested by the predecessor firm that may be needed to respond to any subpoena, potential or actual claim or lawsuit, criminal, civil or regulatory investigation, professional inquiry, peer review, or other similar inquiry or investigation. Cleaner terms are much more desirable for the seller and therefore generally go with a lower price. This comprehensive report looks at the changes to the child tax credit, earned income tax credit, and child and dependent care credit caused by the expiration of provisions in the American Rescue Plan Act; the ability e-file more returns in the Form 1040 series; automobile mileage deductions; the alternative minimum tax; gift tax exemptions; strategies for accelerating or postponing income and deductions; and retirement and estate planning. these relationships are terminated in a respectful and professional manner; the client is informed that you will no longer be providing services to them; and. If it was the firms decision to terminate the relationship, have the legal considerations been evaluated, including the need to consult with legal counsel? Be cognizant of the people side of your CPA practice. We All rights reserved. By accessing an electronic files metadata, a user can access a wealth of background and other demographic information about the file. The seller should explain to the clients why he or she needs to slow down or retire. and invested in their training, development and growth. A successful purchase agreement should be written so that everyone understands the terms of the contract and can move forward with ease and assurance in a timely manner. Clean terms are not only easier to document, terms impact the deal after closing in interesting ways. Typically, a respected figure in the CPA's professional or academic life, such as a professor, supervisor or previous client writes the letter on the applicant's behalf. If clients meet in the seller's office, the buyer should try to keep that location of the seller open at least through the first busy season. Please do not hesitate to call either of us directly, anytime. Use this financial advisor introduction letter sample We can help you write your letter and customize it 100% to your business. From a risk control perspective, the recommended practice in these circumstances is for the predecessor firm to retain possession of the original working papers in accordance with its record retention policy. This transition can be difficult, but with thoughtful planning, the shift into retirement can be relatively smooth and even exciting. Some of the issues firms frequently run into with earnouts directly relate to misunderstood roles of the seller and buyer after closing. past 33 years has been predominantly internal, stemming from the On that date our combined firm will begin conducting its practice as ABC & Co. Our firm began its professional practice in 1976. Merging with or acquiring another firm is an exciting moment of opportunity and growth. The Private Companies Practice Section (PCPS) is a voluntary firm membership section for CPAs that provides member firms with targeted practice management tools and resources, including the Succession Planning Resource Center, as well as a strong, collective voice within the CPA profession. Some are essential to make our site work; others help us improve the user experience. Your remaining responsibilities, if any, to the client. I look forward to working together with you and _____(successor) to handle all your accounting tax and financial needs. The third surprise is the firm owner's need to sell their services in new and creative ways. A form outlining the information required to be documented, such as the facts and circumstances leading to the decision to terminate the relationship. be a part of. The Journal of Accountancy is now completely digital. As you know, in our area a breach of privacy that may have resulted in the unauthorized disclosure of confidential client information to third parties. Such a policy could include a template for the termination letter or other communication. 2023 Poe Group Advisors - All Rights Reserved |, Legal contracts can be very lengthy and at times repetitive. An affirmative statement should be made that the CPA buyer was selected because he or she was the most outstanding of several under consideration. hbbd``b`ja 8`Vw@,EQ $X^&7 The Imagine that you own a growing and successful multimillion-dollar business. Return all calls and emails on the same day they are receivedpreferably within hours of receiving a call. Practices under $ 1,500,000 generally fit into this category. Transition time should be agreed upon in writing but should not include the free billable work of the seller. Your family and your business have been the clients of a CPA in the local community for more than 15 years. You can ask for this letter anytime you need one, unless a request is already in progress, in which case . CPA practice valuations are subjective and vary greatly. Quality of staff, employee competitive threats, partner non-compete issues, non recurring revenues, very strong growth, declining revenue trends, and very large clients are some of the more common factors encountered. The In specific situations other factors may also come into play and impact the CPA Firms value. If you have any questions about when or how to move on from your current CPA, contact an Anders advisor and we would be happy to help you through the decision-making process. Our mission is to provide essential resources for being a great partner and a great firm, Keeping it Together: Plan the Transition to Retain Staff and Clients. Practitioners occasionally ask about sending or responding to a courtesy letter. The transition should focus as much attention on the human dynamic of the client relationships as it does on the technical aspects of client service. In fact, many firms make it an annual exercise to cull their client roster in order to focus their talents and energy on A and B list clients. A cyber-attack could spell disaster for your CPA firm. provide you in the future. Develop a plan for nurturing staff relationships, client relationships, as well as logistical components. Nothing will be added or removed. Firms that render services to health care providers have additional obligations to protect individually identifiable health information of their patients contained in working papers (typically billing records) under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). john.smith@email.com. Understanding some of the nature of the practices clients which includes industries, longevity, and complexity of the work. In light of this fact, I typically recommend the following: During the first couple of years after closing, the buyer should make every effort to minimize change for the clients. Failing to plan for the day when access to original working papers is necessary for a successor firm could be damaging to the predecessor firm in the event of a professional or regulatory inquiry, or a malpractice claim. Some are essential to make our site work; others help us improve the user experience. City, State, Zip Code. are many new services and areas of expertise we will be able to And other demographic information about the file affirmative statement should be made that the CPA firms value best ways terminate. Firm is an exciting moment of opportunity and growth user can access a wealth background. Within hours of receiving a call advisor introduction letter sample We can help you write your letter customize. 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