As stay-at-home notices are expiring, CPA firms and tax practices nationwide are making decisions on how and when to return to their traditional workspaces. While the process continues, employers and employees have many risk factors to consider.
There are multiple sets of guidelines that must be followed, observed Stan Sterna, vice president, professional firms, at Aon Affinity. “There are national guidelines from the CDC, OSHA and the EEOC, as well as state and local guidelines,” he said. “One of the biggest issues firms are grappling with is the uncertainty of laws and regulations. They vary by jurisdiction, and a lot of firms have offices in different states. There’s no definitive plan, just guidance and regulations.”
Though plans will vary by region and locality, there are some constants to initially consider, he suggested.
- Don’t think of it as “return to work planning,” but “workplace safety planning,” since the latter has a more long-term connotation.
- Identify common obstacles to workplace safety planning, such as a lack of transparency. Everyone needs to be fully advised and aware of the plan.
- Communication is key: Establish a uniform cadence for communication and consider using multiple avenues.
- Designate a representative or group at the firm to manage the process and ensure compliance by both management and employees to limit the span of oversight as well as avoid confusion and miscommunication.
- Establish formal, uniform and measured training on the new workplace safety program and modify your training depending on the role of the employee
- Leverage and implement emotional well-being programs for employees.
- Work with designated representatives such as human resources, legal counsel, etc.
- Establish a workplace safety program and protocols.
“The new norm has to be a continuous, long-term process,” Sterna said. “One of the biggest obstacles firms will experience will be transparency. Everyone needs to be fully aware of the plan. That’s obvious, but in claims we’ve seen, there are signs that only a select few understand what the firm is doing. Issues arise where someone did not understand or was unaware of what the plan was.”
Sterna recommends communication at a regular cadence, such as weekly or monthly. “At the same time, multiple modes of communication should be used to ensure that everyone knows what the new normal will be,” he said. “Things are in a state of flux … Some things in the plan might have to be changed, so it’s important to be adaptable in the current environment.”
Tax firms will have some particular issues facing them, Sterna said. “We’re seeing a trickle of claims regarding [Paycheck Protection Program] loans or other programs,” he said. “A client may believe they were not informed that they might qualify for a specific program. Or that the accountant overpromised, and that they were disqualified — the lender said the documents in support of the application were insufficient. So we’re expecting to see claims where someone didn’t get the loan. They will point the finger at the person who helped them, even though they were simply engaged to do taxes.”
An engagement letter should specify that all the accountant is doing is providing assistance for the PPP application, and that the supporting documents contain information that the client is providing. A “hold harmless” agreement is advisable, although separating a genuine engagement from off-the-cuff advice offered over the phone or on a golf course is not easy.
Sterna expects to see effects on claims from the coronavirus. “Fraudsters are using COVID as a ruse to have the victim download corrupted files, or to steal confidential information,” he said. “The big concern is based on the fact that liability claims rise, both in severity and frequency, in a falling economy, and COVID-19 has had a significant adverse effect on the economy.”
Moreover, the myriad of tax changes with a complex calendar of due dates will produce errors for any preparer without a good docket system, Sterna noted. “It’s the same with other services like audit. There will be clients faced with financial issues because of the economic downturn, and since the CPA is looked on as a financial advisor, they will get blamed for any cracks in quality control. We’ve seen claims where an accountant only does tax work, but is blamed for failing to provide proper investment advice. This type of claim will be more frequent when we’re in an economic downturn. The investor will try to recoup money from their accountant or lawyer because they weren’t given advice on what to do to avoid a particular loss.”
In fact, now may be a good time to go through the firm’s client list and cull some of them that might pose problems, according to Sterna. “Take a close look at the ones that may be litigious or have cash flow problems,” he said. “Determine if you want to continue to service these clients in a period of what may be long-term economic uncertainty.”
Also, make sure engagement letters are up to date, he advised. “They should clearly define the scope of the services and roles and the responsibilities of the parties. Consider including loss limitations or damage cap language. And make sure to document and date all client discussions during the engagement and follow up with confirmatory emails detailing information required, and the next steps for both the client and your firm. Moreover, the letter should clarify that any advice or recommendations are made based upon information available at a specific point in time, as laws are evolving, and what is good advice today may not be so tomorrow.”
Clients’ financial issues
“There has been some depression on fees generated by tax firms because of the overall reduction in clients’ business volumes,” observed Rickard Jorgensen, president and chief underwriting officer of CPAGold. “Some CPAs have had to deal with clients’ current financial hardship and accommodations have been made on fee collection and payment schedules. Due to income pressure, some firms have reacted by reducing professional liability limits, but this is rare, as the more sophisticated firms realize that significant liabilities arising from prior services still exist.”
Attempts to seek coverage for the reduction in fee volume via the business interruption section of a business owners policy have largely been denied. “These issues may be litigated, or subject to future laws that seek to provide affirmative retroactive coverage for this,” he said. “So far, I am aware of one professional liability claim arising from assistance in completing a PPP loan application. However, we’ve seen an uptick in cyber-type claims as CPAs working remotely have been the target of criminals and the number of phishing emails sent to accountants has increased.”
Many risks inherent in reopening are still unclear, according to Ron Parisi, CPA, Esq., a former professional liability insurance company executive and managing partner of Ohio-based Orchard Accounting: “People’s reaction to the lack of clarity has been a real challenge to me as a managing partner,” he said. “I have to balance a wide spectrum of perceived risks between my team members and our clients. I have members that think we’re being too cautious, and others think we’re not being safe enough. The real risk is in balancing that spectrum as we continue procedures to reopen our office.”
Parisi sees potential liability in engagement creep. “Setting aside the risks of people getting sick, there is the possibility of people faulting the firm for not providing aid they thought they should get, or in not being forgiven in a PPP plan,” he explained. “The engagement creep comes in when we offer different levels of service to clients, and the type of advice would be way outside our routine service, with no time to construct an engagement letter.”
“Accountants may be giving the best advice they can give at the time, but with the rules changing frequently, it’s very possible to forget where you left off with one client and what was told to a second client,” he continued. “It can be extremely difficult to document everything in a timely fashion because of the massive number of people calling for advice.”
With tax compliance comprising 60 percent of Orchard’s work, Parisi said the firm was able to conduct business by video conference and phone: “Our clients were not particularly happy with the arrangement … Coming out of this is going to test my leadership in being sensitive to both ends of the spectrum. Keeping my clients and staff safe while still trying to run a business.”