Working with an intermediary: Risky business or good practice?

Scenario

AccountingPro is a company that offers “one-stop-shop” accounting services. Since they do not have the expertise of a CPA in-house, they have asked you to work with them as an external consultant. Your responsibility would be to sign all the Notices to Reader, review engagement reports and auditor’s reports they provide to their bookkeeping clients. The company’s extensive clientele guarantees you a steady flow of work and income, which makes the proposal especially appealing. But could this opportunity be too good to be true?

Potential problems …

Like many shiny business opportunities, this agreement might lead you to engage in risky practices that are not always obvious at first glance and that must be avoided.

Practice No. 1 – You do not personally invoice the services rendered to the client

Applying its one-stop-shop model, AccountingPro is the only point of contact with clients, and it issues all invoices. This suggests to the public that anyone can perform acts that are exclusively reserved to CPAs, within the meaning of section 4 of the Chartered Professional Accountants Act. By invoicing clients yourself, there would be no confusion, and in the event of a dispute over a statement of fees, clients can resort to the conciliation service provided for by the Professional Code, a process that is often beneficial to both parties.

Practice No. 2 – AccountingPro asks you to issue your report on their letterhead

Signing an assurance report or a notice to reader on AccountingPro’s letterhead rather than your own raises two problems. First, you risk creating confusion by giving the impression that you are employed by that company. Next, using AccountingPro’s letterhead suggests that it is offering the assurance service, not you. This practice contravenes section 7 of the Code of ethics of CPAs, which requires any firm that offers assurance services to be managed by, or under the personal charge of, a CPA.

Practice No. 3 – You carefully reviewed the client’s file, but had no contact with them

Even if you carefully reviewed the client’s file and suggested corrections before signing your report, the standards are clear concerning the need to know the client’s business in an assurance engagement. If you have never met or spoken to the client and never visited the company, it will be hard to prove that your report was issued in compliance with all the rules and standards in effect, as required by section 19 of the Code of ethics

Moreover, although the standards are not as demanding for a compilation engagement, it is important to remember that section 34 of the Code of ethics stipulates that CPAs must not associate their names with any documents containing false or misleading information. Knowing and dealing directly with the client is the best way to avoid such a situation and identify any anomaly.

Practice No. 4 – You signed your report without reviewing the file prepared by AccountingPro and without meeting or talking to the client

This is an extremely risky practice that must absolutely be avoided. According to section 34 of the Code of ethics, signing a report out of complacency would expose you to a disciplinary complaint.

… but also solutions!

Developing a client base is not easy, especially when you are just starting out. Working with a company such as AccountingPro is not a problem in itself. You just have to do it without taking risks. 

To achieve this, start by implementing a working procedure whereby the company you are working with cannot serve as an impenetrable wall between you and the client. In short, establish and maintain a connection with the client. Have the client sign an engagement letter, invoice your services directly and write your reports on your own letterhead. Signing Notices to Reader, review engagement reports or independent auditor’s reports are acts reserved to CPAs. This must be clear to everyone.

Establishing good practices is an art, and placing limits on third parties can sometimes lead to resistance. However, a company that values professionalism and is serious in its approach should not feel threatened by this and, instead, see it as the sign of a win-win partnership.

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