| Documentation helps improve communications between clients and their CPA firms and provides a value-added service to clients while creating potential new services. For example, during a tax-preparation engagement, a CPA might document a way for the client to reduce a tax liability, thereby expanding the engagement to tax-consulting services, or a practitioner hired to do a simple compilation of financial statements might document ways in which a review or an audit may reveal additional client needs. Here are some tips for an engagement. 
Document communication between you and your client. This is vital for tasks including aggressive tax positions, business and investment advice, fund handling, mergers and acquisitions, projections, systems analysis, trustee work, valuations, forecasts and controller or CFO services provided on a contract basis.
Always record follow-up and significant communications. This is especially important when there is a change in the scope of an engagement, when a tax return is late or when your client is facing an audit. It’s helpful as well when the predecessor CPA took an aggressive tax position to which your client consented, even though you know the IRS later ruled against similar tax positions taken by others, resulting in additional assessments.
When your clients need to take material action—that is, action that would be relevant and significant in a future court dispute between you and them—on discussion, document their consent to the risks and consequences before you take action. A significant number of claims against CPAs stem from clients being given undocumented oral advice and warnings, which they tend to forget if they later are disappointed by the results of an engagement. Put all critical advice in an informed consent letter that outlines the pros, cons and options in terms the client will understand. This document clarifies that the CPA advises and informs and the client decides . |
Document only the facts—and as soon as possible. Refrain from extraneous speculation or comments on the client’s performance or personality in your notes. Unprofessional or inappropriate comments can damage the integrity of the documentation and turn a jury against the CPA. Facts to be written down include client name and contact information, file number, dates, times, pertinent details of all follow-up action you’ve taken, and if and when you’ve sent the client a letter confirming this. Place notes in the client file, and maintain only one set of client files. This provides members of your firm with easy access to up-to-date communications.
Document efficiently by using a systematic approach including key words and concepts in plain English. For example, a tax opinion should clearly define the tax issue being addressed, present only the facts on which the opinion is based and describe the scope and limits of the opinion given. The “reasonable person” rule applies here—that is, a reasonable person should be able to read the document and understand it without needing additional explanation.
Seek legal counsel if documentation alone isn’t sufficient. If you’re advising a client on a complex tax strategy, you may want to have your legal counsel review the documentation before passing it on to your client.
Make documentation a habit. All employees need to learn and use effective documentation skills. Senior members can set an example by following the same recordkeeping procedures they require of their staff. An easy way to do this is to require all employees to keep notepads next to every telephone and use them to track all the pertinent facts of the actions they’ve taken. This simplifies the process by making documentation a reflexive action whenever the phone rings. |
