Date posted: 31/05/2022

Navigating difficult client handovers

There’s a right way to gain clients. Here is a quick guide on best practice to ensure your client handovers are as ethical and professional as possible.

In brief

  • Consider enforceable agreements relating to clients and intellectual property
  • As a CA, you’ll need to abide by the principles of professional behaviour under APES 110
  • If a client has granted you consent to respond to an ethical matter, be impartial and stick to the facts

The nature of accounting is that sometimes we get new clients – and sometimes we lose them. Regardless of the situation, we need to make sure we handle these transitions professionally, and in line with our ethical standards.

Here are some tips for a smooth transition that will leave your professionalism and reputation intact.

When a client leaves you for another accountant

It is inevitable in the course of professional practice that some clients will change to another accountant, even if they have been served well. 

Many Chartered Accountants seek guidance through the Professional Standards Advisory Team after a client leaves them – and the loss of a long-standing client to a fellow member has also been at the heart of cases brought before our disciplinary tribunals.

To reduce the risk of a former employee taking clients to a new firm, consider entering into enforceable agreements that address concerns relating to clients and intellectual property.

When you lose a client, keep in mind that they are not your property. They are free to change their accountant whenever they choose, and don’t have to justify their decisions.

What are your obligations?

As a Chartered Accountant, you’ll need to abide by the principles of professional behaviour under APES 110 Code of Ethics for Professional Accountants (APES 110) and CR 3 – Public Practice Regulations. These require that all professional correspondence and enquiries are answered without unnecessary delay – although replies to the new accountant may be by telephone.

APES 110 also stipulates that you must adhere to the fundamental ethical principle of confidentiality. This means you must obtain client consent before disclosing any client information acquired during your professional relationship (unless you have a legal duty to do so) – even when it has ended.

Under APES 110, you must also send an ethical letter for all audit engagements. For non-audit engagements, Chartered Accountants Australia and New Zealand (CA ANZ) considers this best practice and an important tool for risk management.

What if there is an ethical issue?

Generally, when you send an ethical letter, it will be straightforward. But occasionally there are situations where you feel that you have a duty to alert the new accountant to an ethical problem associated with a client but are constrained by confidentiality.

If an issue exists, clients may be unwilling to grant consent for you to share that information. So how do you respond?

One way can be to respond in a way that enables the new accountant to use their professional judgement and form their own opinion. For example, you could say “Our client has not granted us consent to respond to your query, so under our ethical principle of confidentiality, we are unable to answer your query.”

If a client has granted you consent to respond to an ethical matter, take care with framing your response, be impartial, only advise as required – and stick to the facts.

What must be handed over?

This depends on what’s been requested. CA ANZ Guidance Note N1 – Books and Records – ownership, possession and disclosure (N1) has been prepared to assist in understanding your position with respect to books and records.

First, you’ll need to determine who owns the records (the client or the accountant). If you own the records, you’re not required to hand them over. If the client owns them, you must hand them over, unless you are able to rely on a lien with respect to unpaid accounts. Liens are a legal instrument, so you should seek legal advice to confirm whether they can be enforced in your situation.

You won’t need to hand over working papers from the engagement unless they are:

  • required to be held by the client under the Corporations Act
  • the end product of the engagement.

Statutory books of companies, such as the register of members and minute books, are owned by the client and must be returned. These documents cannot be the subject of a lien.

“You must obtain client consent before disclosing any client information acquired during your professional relationship (unless you have a legal duty to do so) – even when it has ended.”

What happens if the former accountant won’t cooperate?

If your client has a valid claim on documents and the former accountant is unwilling to hand these over, then legal advice is recommended.

It is our understanding that if an accountant has satisfied all legal obligations regarding delivery of such documents, there is no further obligation to offer the information on repeated requests by the new accountant, although this is sometimes done as a professional courtesy.

Callout:

Some dos and don’ts:
Don’t take your clients for granted. If you don’t have the expertise to help them, remain involved at an appropriate level. Always listen and refer them to a trusted colleague or contact. That way you can ensure they can receive the professional service they need.

Don’t wait for a client to terminate an engagement if they are dishonest or acting unprofessionally. It’s better to end the relationship early than risk your reputation.

Don’t withhold records or information owned by the client and needed by the succeeding accountant to attend to the affairs of the client properly and efficiently, except where there is a clearly justifiable reason.

Do respond to the ethical letter. A written or telephone response is acceptable.

Don’t take the loss of a client personally and never be vindictive. At the very least, part on good terms, and never burn your bridges.

Do try to understand the reason a client has left – that way you can learn from any mistakes.

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 to an experienced member of the Professional Standards and Ethics Advisory team. 

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.

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Guidance Note N1

This document provides useful advice on ownership, possession and disclosure of books and records. 

Read more

Engagement Letter tool

Engagement letter tool containing sample clauses to assist members in practice to prepare engagement documents for use with their clients in Australia or New Zealand.