Are you taking the right steps to manage (and document) client expectations? Effective communication is a key factor in any CPA-client relationship, and when you work to stay in control of managing client expectations, you help to safeguard your firm. To that end, good documentation is critical to successfully managing client expectations. Jurors (members of the public) generally consider CPAs to be experts in documentation, and falling short of that expectation may be viewed as negligent and perceived as falling below the standard of care.

Below are helpful documentation tips to get you through the remainder of tax season:

• Engagement letters. While engagement letters won’t immunize you from lawsuits, they can be your first line of defense if a client makes a claim against you. Although you likely already have executed engagement letters in place with your tax clients, for those engagements that have had some engagement creep, memorialize the additional services by updating your engagement letter or obtaining a signed addendum clarifying the revised scope and limits.                                                                                                                                                                                                                    
• Always document significant meetings and communications. Follow up with written communications in circumstances including, but not limited to:
  • Change in engagement scope (may require a new engagement letter)
  • Negative information (e.g., tax return is already late, client’s failure to timely provide information, client is facing an audit)
  • Judgment calls (e.g., aggressive tax positions taken by your predecessor)
  • Client agreement to take significant action
  • Conversations regarding transactions, extensions, or estimated tax payments                                                                                                      
• “Advise” clients of opportunities and “warn” clients about risks. Consider the need for additional documentation (e.g., client notification letters, tax representation letters, etc.) to mitigate high-risk issues such as the following:
  • Recent legal and regulatory developments regarding the Beneficial Ownership Information (BOI) reporting requirements under the Corporate Transparency Act (CTA) have implications for reporting companies’ compliance obligations and FinCEN’s enforcement of the CTA reporting rules as currently promulgated. As the CTA-BOI saga continues, CAMICO strongly recommends that CPA firms continue to keep clients informed and advised as these significant developments occur.
  • For clients with significant digital asset transactions, it may be prudent to have them sign a tax representation letter or a stand-alone certification letter at the conclusion of the engagement addressing cryptoasset implications. The additional defensive documentation provides evidence of the client’s understanding and acceptance of their responsibilities regarding digital asset transactions and the limitations of the services your firm provided.                                                                                                              
• Written documentation should be factual, professional, and without personal commentary or unsubstantiated opinions. Unprofessional and/or inappropriate comments can damage the integrity of documentation. Ask yourself whether your documentation would be helpful or harmful if presented at trial.