Most practitioners know the building blocks of professional liability risk management: acceptance, billing, communication, documentation, and engagement letters. However, implementing these practices thoroughly and consistently may fall by the wayside for sole practitioners and small firms when faced with day-to-day demands. Luckily, risk management practices are customizable and can be right-sized.

A IS FOR ACCEPTANCE AND CONTINUANCE

Acceptance

Working with the “right” clients can help save you headaches in the future. Performing client acceptance does not have to include a long checklist — tailor it for your firm and services by:

• Talking to the prospect. Understand the client’s expectations. Why is the client changing CPAs? Does the client understand their responsibilities related to your services?
• Researching the client.
  • If services are limited to tax return preparation, it may suffice to search the internet for the client and key members of management to identify red flags like integrity issues, previously suing professionals, or a financial crime.
  • For client accounting services (CAS) clients, consider additional research because the client’s competence impacts your services. Speak with other service providers to help assess the client’s capabilities, financial acumen, collection risk, and timeliness.
• Reviewing prior–year deliverables. Review previous work to see if there are areas in which you lack knowledge and experience. Determine how you will provide the services competently if you accept the engagement.
• Conducting additional and deeper due diligence for attest services such as audits or reviews, given the increased risk of these services.
• Doing a gut check. Your intuition may sense red flags sooner than your brain.

As your firm grows, consider creating a list of client characteristics that have caused problems in the past, and use this list to help avoid future clients with similar red flags.

Continuance and termination

Client and engagement continuance is sometimes overlooked by small practitioners who may feel compelled to continue a professional relationship, even if the client is not quite the right fit.

Rather than critically evaluating every client annually, consider keeping a running list of “challenging” situations as they occur. This could be a physical list kept in a desk drawer or a virtual list saved online — the key is writing it down in the moment, since memories are fleeting.

Before agreeing to reengage with a client for another year, review your list of previous client challenges. If there are clients with multiple issues or who have been difficult to deal with when times are good, imagine how they might behave if problems arise in the future.

Additionally, consider whether a client’s needs have grown beyond your expertise and comfort level, which may signal it is time to reassess the relationship.

If you determine that continuing the engagement is no longer in your best interest, send the client a termination letter to formally document the end of the relationship and notify them of any upcoming deadlines.

B IS FOR BILLING

CPAs may be reluctant to address growing work-in-progress and unpaid invoices with longtime clients they consider “friends” and may continue to provide services. While a larger firm would have cut off the client sooner, small practitioners, triggered by feelings of personal betrayal, may pursue aggressive collection efforts, sometimes without speaking to the client first. Claim experience demonstrates that aggressive collections often result in counterclaims for malpractice, even from “close” clients.

If a client does not pay their invoices, the CPA should pause services and call the client to find out why. While potentially uncomfortable, a direct conversation is necessary. Document the results of the discussion, including the agreed-upon payment strategy, in an email to the client. If the client does not follow through with the plan, halt services again, and consider terminating the client relationship. This approach may appear harsh and unfeeling, but it can help prevent digging yourself deeper into a hole that will be tough to climb out of later.

C IS FOR COMMUNICATION AND RELATIONSHIP MANAGEMENT

As a practitioner in a small firm, you know the importance of relationships — after all, your business is built on them. However, that close relationship and pride in “knowing what the client wants” may cause the CPA to forgo client communications and make decisions on their behalf. When clients are not involved in decisions related to your services, they are more likely to deflect blame for any negative consequences that result. For example:

The CPA was responsible for preparing both the partnership return and individual tax returns for two out of the three business owners. Following previous years’ practice, the CPA made a pass-through entity tax (PTET) election for the partnership.

Unbeknownst to the CPA, the third owner, whose individual return was not prepared by the CPA, had relocated to Nevada. As a result, the PTET election was no longer suitable for the partnership. Because the tax election was irrevocable, it created an inequity among the owners. The partnership filed suit against the CPA due to the error.

So how do you manage client communications in a way that helps underscore your strong client relationship but also helps manage your risk? Consider the following:

• If there is more than one way to treat an item, explain available options and your recommendations to your client. It is the client’s tax return, so let them decide which option to take. This approach helps demonstrate your expertise and ensures that the client makes the final decision.
• When clients have issues that will not be resolved quickly, regular status updates let the client know you have not forgotten them, even if the update is only “we are still waiting to hear from the IRS.” In the absence of a status update, the client may fear the worst.
• For more complex clients, consider quarterly meetings to keep yourself up to date on the client’s activities and keep the client up to date on changes to regulations, guidance, and enforcement activity.
• For other clients, consider a semiannual communication, like an email newsletter, about “what’s new” and encourage them to contact you off–season with any questions.

To help avoid a battle of memories, follow up verbal discussions with a quick email summary and save it in the client file.

D IS FOR DOCUMENTATION

Documentation is challenging for all practitioners. It is also essential. Why? Many CPAs find it is easier to bill for services that are documented, even if thoughts are preliminary. Additionally, should a dispute or disagreement arise, documentation is often key to your defense. Professionals, including CPAs, are generally held to a higher standard and are perceived to be not as credible if something is not written down.

So how can a small firm CPA efficiently document client conversations? Consider creating an email template to help guide the creation of follow-up emails after client meetings and phone calls. Include the following:

• Questions raised;
• Facts assumed;
• Assumptions made, including dates, amounts, and other relevant information, as appropriate;
• Any items needed before a conclusion is reached; and
• A statement that any thoughts provided are preliminary, are based upon limited information, and should not be acted upon without further research by the CPA.

If the firm opts to use generative AI to summarize meetings, consider the tips in “Tell a Story With Your Documentation,” JofA, Feb. 1, 2026.

Accept the reality that documentation is necessary and can be challenging. Meet the challenge by following up phone calls and meetings with emails.

E IS FOR ENGAGEMENT LETTERS

Many small firms know engagement letters are important but struggle with implementation. Long-term clients, and even relatives, sue their CPAs, so having a well-drafted engagement letter is essential, even if requesting them from a longtime client seems uncomfortable.

Consider the following suggestions to help reduce administrative time:

• Leverage engagement letter templates from the AICPA, professional liability insurers, and paid providers;
• Use unilateral engagement letters for simple, lower–risk tax returns such as Forms 1040, U.S. Individual Income Tax Return; and
• Invest in specialized software that can create, deliver, receive, and manage the engagement letter process. The efficiency gained is often worth the software’s cost, which many small practitioners find reasonable.

While technology can help substantially reduce administrative time, non-cookie-cutter services like tax consulting or CAS generally require more time to determine and draft the scope of services. Instead of seeing this as an administrative burden, leverage the opportunity to identify uncompensated or additional needed services.

More ideas for engagement letter implementation can be found in “Tips for Writing CAS Engagement Letters,” JofA, April 1, 2026, and “Blocking and Tackling: Engagement Letters for Tax Compliance Services,” JofA, Nov. 1, 2025.

AN OVERLOOKED RISK TO YOUR PRACTICE — HEALTH CONCERNS

With only so many hours in a day, small firm practitioners may prioritize their firm’s health over their own. If you are abruptly unable to perform services or cannot do so at the same level as you used to, malpractice claims may arise, often due to missed deadlines. Read “Succession and Practice Continuation Agreements,” JofA, Aug. 1, 2023, to learn more on addressing this important, but overlooked, risk.

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A small price to pay

$50: The cost for a sole practitioner to join the AICPA Private Companies Practice Section (PCPS) for one year. The PCPS supports CPA firms of all sizes in the everyday intricacies of running a practice by providing practical and customizable practice management resources.

Source: PCPS firm membership page.

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Deborah K. Rood, CPA, MST, is a risk control consulting director at CNA. For more information about this article, contact specialtyriskcontrol@cna.com.

Continental Casualty Company, one of the CNA insurance companies, is the underwriter of the AICPA Professional Liability Insurance Program. Aon Insurance Services, the National Program Administrator for the AICPA Professional Liability Program, is available at 800-221-3023 or visit cpai.com.

This article provides information, rather than advice or opinion. It is accurate to the best of the author’s knowledge as of the article date. This article should not be viewed as a substitute for recommendations of a retained professional. Such consultation is recommended in applying this material in any particular factual situations.

Examples are for illustrative purposes only and not intended to establish any standards of care, serve as legal advice, or acknowledge any given factual situation is covered under any CNA insurance policy. The relevant insurance policy provides actual terms, coverages, amounts, conditions, and exclusions for an insured.