Most members in public practice have experienced clients leaving. Less common is the situation where you can no longer work with a challenging client. How do you smoothly disengage? And do you need to provide a reason? Here’s how to gracefully and professionally end a client relationship.  

Reasons for disengaging

There are several reasons you might decide to stop acting for a client. Indeed, the Code of Ethics requires you to periodically check your engagements remain a good fit for your practice. 

Disengaging from a client can be stressful and time consuming, but you should be prepared to do so if needed. Here are three typical reasons:

You have ethical concerns 

Working for your client may threaten your compliance with our profession’s ethical principles in a way you can’t effectively manage. For example, you may be uneasy about:

Professional competence and due care: If the engagement has become more complex, it may require a skill set that you don’t have. You realise that continuing could risk your duty to act with professional competence and care. 

Integrity: You may discover your client has been deliberately providing incomplete or inaccurate information. If they are unwilling to correct the information provided, then you can’t remain associated with tax returns or accounts that you know are false or misleading. Your integrity is at risk. However, keep in mind that, even if you cut ties with the client, you may still have a professional or legal obligation to set aside your duty of confidentiality to the client and report them to a regulatory body. Always seek advice on this issue if you are unsure. 

Conflict of interest: It may be that your client’s directors are in dispute, or a family business has separating spouses and relations are acrimonious. You are now in a position of identifying and managing conflicts of interest. This will likely create threats to your ethical principles. Safeguards will need to be implemented (such as only taking instructions where all parties to the engagement agree). If safeguards can’t reduce threats to an acceptable level then disengagement may be your only option.

It’s a problematic relationship 

Perhaps your relationship with your client has broken down, or they’re difficult to work with, challenging your work, refusing advice or slow to respond. Perhaps they have messy records or don’t provide critical information. If your relationship is beyond repair, it may be in everyone’s interests to release your client to work with another accountant who’s a better fit. 

They don’t pay your fees

Repeated late fee payment without a reasonable explanation can threaten your cashflow and make it difficult for you to retain this client.

Consider having a discussion about the disengagement with your client before sending the disengagement letter. You don’t need to give the client a reason for deciding to terminate your services, but you do need to act professionally.

Five steps to disengagement

To avoid unnecessary conflict and risk, step through disengagement carefully:

1. Set a disengagement date. Once you’ve decided to part ways with your client, act promptly so that your client isn’t disadvantaged.  Ideally, disengage after completing current advice or year-end work, although circumstances may force you to act with greater urgency. Short-notice disengagements could be viewed as a breach of contract and cause client loss.     Also consider any specific laws or regulations, such as the ASIC rules specific to auditor resignations in Australia.


2. Be clear about the parties you’re disengaging from. Perhaps you want to disengage from a business entity but retain the personal work of its owner.


3. Consider having a discussion about the disengagement with your client before sending the disengagement letter. You don’t need to provide a reason for terminating your services, but you should act professionally. The objective of a discussion is to help the client feel as comfortable as possible with the disengagement and reduce the risk of future problems.


4. Send your disengagement letter or letters to your client, including the following as appropriate:
   
   • The disengagement date clearly stated.
   • An update on the status of your services and any relevant due dates. This will help the new accountant understand what work needs completing.
   • A request for written authority from the client to provide information and documents to the successor firm if the client wishes.
   • A list of records that will be returned to the client and the records that you’ll retain for the appropriate statutory period, with confidentiality assured.
   • An invoice for any fees outstanding with a clear request for payment. 
   
   Access templates and guidance to assist you with your disengagement:  
   
   Australian disengagement letter templates 
   New Zealand engaging and disengaging clients help sheet  


5. Document your reasons for disengaging and notes on any client discussions in your practice records. 

After you disengage

Your professional obligations, including confidentiality, remain after you cease to act for the client. Respond promptly and professionally to an ethical clearance letter or requests for records from the new accountant. 

Look for ‘red flags’ before you take on a new client

Although it may be an easy observation in hindsight, robust client acceptance procedures and sound due diligence on prospective clients, can help prevent the need to disengage later. 
Some questions to ask before you take on a client include: 

• Have they had a series of accountants in a short period of time? 
• Are they often behind in their lodgements? 
• What do their records look like? 

If you accept the engagement, ensure you have a clear engagement letter that complies with APES 305 (Australia), or PS-3 Terms of Engagement (New Zealand). Carefully consider the termination clause in your terms and conditions.  

Where to go for more information

Do you have any further questions or need practical guidance on a complex professional issue? As part of your membership with CA ANZ, you can speak directly with our team of professional and ethical experts. 

This free support service is completely confidential and available to all current members. Make an enquiry via phone or email, or by using the online form provided on our contact page below.