How to Be Careful and Still Be Clear

Balance CPAs’ need for protection with clients’ need for clarity.
BY ELIZABETH DANZIGER

EXECUTIVE SUMMARY
  • IN AN EFFORT TO SIDESTEP POTENTIAL LIABILITY, CPAs may obscure rather than clarify important information presented to clients. The types of documents least affected by professional standards are the ones that are most important for practice development.
  • A CPA WHO SPEAKS AND WRITES PLAIN ENGLISH develops a reputation as a linguistic “straight shooter.” Clear writing builds bridges of trust and understanding and can protect a firm from the kind of confusion that leads to litigation.
  • CLIENTS PAY CPAs TO COMMUNICATE CLEARLY to them so they can make good business decisions. You can counsel clients effectively only if you use language they understand.
  • BOILERPLATE DISCLAIMERS SPELL OUT a job’s limitations and liabilities. These boundaries are intended to keep the client from having unfulfilled expectations. Ask how a jury would understand the disclaimer. If jurors might not get it, then reduce and clarify it further.
  • PRESENT TECHNICALLY COMPLEX INFORMATION in a reader-friendly structure. If each piece of information in the sentence is indispensable to conveying the full meaning, use a bulleted list to organize the data.
  • CLIENTS MAY BE ABLE TO FIND A CHOICE OF CPA firms to produce comparable data and analysis, but if yours are easier to understand they will recognize the value.
Elizabeth Danziger is the president of WORKTALK, a Los Angeles–based company offering writing training and consulting services to financial professionals. She writes frequently on communication skills. Her e-mail address is lizd@worktalk.com .

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The JargonMaster is, of course, imaginary but, unfortunately, the need to translate CPAspeak for clients is all too real. Technical doublespeak is a time-tested defensive measure for all sorts of professionals, and CPAs are no exception. The problem is that in trying to sidestep potential liability CPAs may obscure important client information rather than clarify its meaning.

In a Word?

“Other than tax compliance claims,
a communications breakdown
between CPA and client is at the
heart of a significant majority of
claims…at least 70 percent.”

Source: Ron Klein, JD, CFE, Camico vice-president of claims.

Even SEC Chairman Arthur Levitt sees benefits to the profession in using direct language. In a recent address to the AICPA council, Levitt said he would like to see CPAs “hone specific, but plain English definitions for the types of information [that] should be included in public disclosure.” You don’t need to allude to every contingency in every paragraph to play it safe. It truly is possible to

Express yourself in plain English and cover all the bases.

State the basis for assumptions and the limits of an engagement and still communicate clearly with clients.

Use the boilerplate language that insurers and legal counsel recommend—without letting the tone of such disclaimers overwhelm every sentence.

THE PARADOX OF PLAYING IT SAFE

To build sound client relationships, a CPA must be both understandable and circumspect. A reputation for being a linguistic “straight shooter” can help protect a CPA from the kind of confusion that leads to litigation. Of course, to guard against lawsuits, engagement letters should always use the standard disclaimers recommended by malpractice insurers and state CPA societies. But clients are less likely to sue someone they like—and they are inclined to like a professional whom they can understand without a translator.

Debra Hunter, CPA and partner of Hunter Hagan & Co., in Scottsdale, Arizona, points out that obfuscation may make a CPA feel safe but it’s far from foolproof as a protective measure. “Language that confuses clients makes them feel we have something to hide,” Hunter says. “I think some professionals believe they will seem smarter to the client if they use confusing language and professional jargon. But clients are paying us to communicate clearly to them so they can make good business decisions,” Hunter adds.

Jed Albert, JD, of Payne, Wood and Littlejohn in Melville, New York, agrees that practitioners who produce succinct findings and analysis create more value for their clients. Albert says that CPAs may intend to be thorough yet may overlook an important point: “The role of any professional is to counsel, not to direct. You can counsel clients effectively only if you use language they understand.”

Boilerplate disclaimers spell out a job’s limitations and liabilities, but a client may not read the disclaimer carefully or may not understand exactly what it means. If the client turns into an angry and determined litigant, he or she can cost you an enormous amount of time and money, even if you included the boilerplate text. “You do not have to be wrong to be sued,” Hunter says.

Robert N. Pulliam, CPA, of Pulliam Financial Group PLLC, in Winston-Salem, North Carolina, says, “The most common charge I see in CPA malpractice claims is ‘I didn’t understand the boilerplate language in the CPA engagement letter.’ That concept is often regrettably easy to sell, since few jurors understand what is written.”

Butch Williams, CPA, of Dixon Odom PLLC, in Birmingham, Alabama, notes that the scope of an engagement seems to be a common area for misunderstanding. “What does the client understand that the CPA will do for the fees quoted? What does the CPA firm understand it is required to do? Without effective communication about the engagement, supported by a concise understanding in an engagement letter, conflicts can arise,” Williams says.

Words to the Wise
Problem Solution
The effect comes before the cause. Transpose the cause and effect.
B is due to A. A led to B.
B is caused by A. A caused B.
B was the result of A. A caused B (or A led to B).
B can be attributed to A. A led to B.
Using nouns instead of verbs. Use the verb form.
X stated that payment would not be made. X stated they would not pay . (Or X stated that Y would not pay .)
This event is a representation of… This event represents…
The inclusion of the reserve, [etc.]… Including the reserve, [etc.]…
The issuance of invoices, [etc.]… Issuing invoices, [etc.]…
Using the passive voice. Use the active voice whenever you reasonably can.
X is denoted by Y. Y denotes X.
X can be identified by Y. Y identifies X.
The amounts are expected to be collected… The company expects to collect the amounts…

HAZARDS OF A HAZY LANGUAGE

When accountants dive for cover, the result can be sentences such as these examples from CPA correspondence:

“In order for us to approve a construction loan disbursement, the amount requested by the borrower cannot exceed the remaining undrawn portion of the loan and the activity for which the request is to pay must be complete and verified by a property inspection.”

“If the money cannot be taken out of the trust, then no debt is presumed to be incurred or continued to purchase and carry such obligations because there is no relationship between the debt and tax-exempt obligations.”

Jenny Bolsky, a CPA and audit manager with Miller, Kaplan, Arase & Co. in North Hollywood, California, thinks such usage is largely avoidable. “In documents such as financial statements, we don’t have a lot of leeway,” she says. “But in proposals, correspondence and management letters, we have more flexibility.”

Fortunately, the types of documents that are least affected by professional standards are those that are most important for practice development. In other words, you can write a friendly letter without worrying about adding a disclaimer before yours truly.

THREE HAZE MAKERS YOU CAN ELIMINATE

Three common smokescreens in CPAs’ written statements are

Waffle words.

Long, involved sentences.

Convoluted disclaimers.

How effective are these devices? They are not helpful at all, says Hunter. “Our clients are not stupid even when they are not familiar with our terms. We need to write in clear terms the client understands.” Here are some practical ways to clear up the haze.

Haze maker 1: Waffle words. These words (also known as weasel words)—such as seems, indicates and appears —are used to soften direct statements.

Larry R. Cook, CPA, in Houston, says, “Some practitioners may believe that weasel words afford some protection, as they could have several interpretations. However, in a legal action murky language is quickly sniffed out and offers little protection.”

Instead, write what you mean. For example, if there really are discrepancies, then don’t write there seem to be discrepancies. Write there are discrepancies. If the invoices were not signed, then don’t write it appears that the invoices were not signed. Write the invoices were not signed.

Waffle Words

Example: The controller indicated that the primary reason for this alteration was due to the change in the subtotal of the nonprime category which directly affected the concentration calculation.

How did the controller indicate this fact—through sign language? It doesn’t state how here. If the controller said something, step right up and write said or stated . Here’s a revision: T he controller said the alteration was caused principally by the change in the subtotal of the nonprime category.

Haze maker 2: Too many words. Long, involved sentences leave readers rubbing their foreheads in pain. Do yourself and your clients a favor by making your message easy to read. Unlike Charles Dickens, you aren’t paid by the word, so keep your average sentence length between 10 and 17 words. Use bullet points if that will make the information easier to grasp. Imagine that the document you are writing just drifted into your inbox. Would you want to read it?

Present technically complex information in a reader-friendly structure. Pulliam says, “Our firm demands of all staff that they ‘say it simply.’ Our policy is to have no more than five lines per paragraph, and to try to place no more than 11 numbers on a page. We also use bullets and visuals.”

The following sentence in italics is 46 words long. The existing defective reserve of 1.65% appears inadequate, and the analyst recommends that either the actual dollar value of defective items, as shown on the company’s monthly breakdown of inventory by location, be excluded from eligible collateral going forward or that the reserve be increased to 3.4%.

How do you hack up a monster like this? First, cut it at the conjunction and. This at least will give you one 7-word sentence and one 39-word sentence. Then look for ways to shorten the 39-worder. Identify the main subject and verb along with the key noun–verb combinations of the rest of the sentence and you will see the core structure of the sentence: The analyst recommends that either the actual dollar value of defective items, as shown on the company’s monthly breakdown of inventory by location, be excluded from eligible collateral going forward or that the reserve be increased to 3.4%.

In short, cut long sentences at conjunctions. Group related information. Reduce the average length of your sentences. Use the active voice as much as possible. As Thomas Jefferson said, “The most valuable of all talents is that of never using two words when one will do.”

Break It Up

Nonprime at 12/31/96 included $536m to remove an invoice included in the 12/31 aging that was originally billed and credited in December ’96 and rebilled in January ’97, $31m in accounts 90 days past due, and a $101m concentration reserve for account debtors in excess of a 25% concentration reserve.

If each piece of information in the sentence is equally relevant, use a bulleted list to organize the data in a more readable format. For example, rewrite the above sentence as

Nonprime at 12/31/96 included:

$536m to remove an invoice from the 12/31 aging that was billed and credited in December ’96 and rebilled in January ’97.

$31m in accounts 90 days past due.

$101m concentration reserve for account debtors in excess of a 25% concentration reserve.

Haze maker 3: Complicated, vague disclaimers. “Disclaimers themselves are not protections to the degree that people think,” says Ron Klein, vice-president of claims for Camico, an insurance company that works exclusively with CPAs. “The belief that you can put some boilerplate language into a document and thereby completely protect yourself can end up doing harm.” One purpose of a disclaimer is to educate the client about the extent and type of service that will be rendered.

Klein suggests that practitioners ask themselves if a jury would understand the disclaimer they’ve written. If jurors might not get it, then reduce and clarify it.

“Disputes and litigation almost always follow a breakdown in communication, and CPAs must prevent that from happening,” says Butch Williams. Ambiguous disclaimers create fertile ground for misunderstanding.

The purpose of a disclaimer is to clearly delineate the boundaries and scope of the engagement, to state what the practitioner will and won’t do and to list the constraints and assumptions that may affect the results of the work. The client may be unclear about any of these factors, and a disclaimer such as this example in italics is not likely to help: Although our analyses are based on currently available information, such analyses are based on assumptions about future developments in the economy and the local real estate markets, and on assumptions about future actions by various parties, including government agencies, the occurrence of which cannot be assured.

This statement is intended to remind the reader that projections are based on today’s assumptions, and if the basis of those assumptions changes in the future, then the results change. This fact is important to include in the projection. But what the boilerplate actually says is that the occurrence of future actions by various parties cannot be assured. In fact, barring a catastrophe, some future action by various parties can be assured. Thus, the statement does not accurately express the meaning intended.

Rather than rely exclusively on a written disclaimer, meet with the client and tell him or her what’s involved in the engagement. Then follow up with a letter that clearly states the boundaries of your commitment along with the inherent limits of your knowledge, assumptions and projections.

PLAIN ENGLISH HELPS BUILD RELATIONSHIPS

Marketing your firm as a “plain English” accounting practice tells prospective clients that you care about their time and you take responsibility. “Listening to clients’ needs and clearly documenting what we are going to do, when we are going to do it, how much we will charge and when we expect to get paid all add up to stronger client relationships,” Williams says. “We prefer to address any concerns prior to the engagement rather than have conflicts arise after its completion.” A vital way to build strong relationships is through frequent, clear communication, both spoken and written.

In today’s highly competitive economy, it’s hard to maintain a significant market advantage based on technical skills alone. For many businesses, the most powerful value-added service is communication. Clients may be able to choose among CPA firms to produce comparable data and analysis, but if yours are easier to understand they will recognize the value.

Resources for Recovering Obscurantists

Books

Write to the Top! 2nd ed., Deborah Dumaine. Random House, New York. 1989.

How to Write, Speak and Think More Effectively, Rudolf Flesch. Signet, New York. 1960.

Write Right, revised ed., Jan Venolia. Ten Speed Press, Berkeley. 1988.

Word Court, Barbara Wallraff. Harcourt, New York. 2000.

Internet

Plain Language Action Network: www.plainlanguage.gov.

A plain English handbook: How to Create Clear SEC Disclosure Documents: www.sec.gov/news/handbook.ht.

NLRB style manual: A Guide for Legal Writing in Plain English. U.S. Government Printing Office: www.gpo.gov or call 202-512-1800.

Guide to grammar and writing: ccc.commnet.edu/grammar.

Quick References

www.yourdictionary.com.

www.plumbdesign.com/thesaurus/.

Training Programs

The Business Writing Center: www.tasks.com/center or call 800-827-3770.

Twain Associates: www.twainassociates.com or call 630-665-9370.

Worktalk Communications Consulting: www.worktalk.com or call 888-967-5825.

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