Rules of engagement for Professional Accountants

The way you engage with clients is an ethical issue too

South African Institute of Professional Accountants
8 June 2020

Rules of engagement
For Professional Accountants, the way you engage with clients is an ethical issue too.
By Shahied Daniels, CEO, South African Institute of Professional Accountants

When one thinks about ethics, one’s mind immediately conjures up some big moral dilemma and how you, as a professional, should act. That’s obviously part of it, but true ethics should be embedded in the way a Professional Accountant (SA) conducts his or her business in the ordinary course of events—in that sense, everything a Professional Accountant (SA) or any other professional does in his or her business life should be done ethically.

This is particularly evident in the way a Professional Accountant (SA) engages with clients.

Clearly, any business relationship needs to be conducted with the utmost professionalism, but it must also be admitted that there is considerable scope for dispute. This is particularly true when the professional is providing vital services or dealing with sensitive information, as an accountant does. In areas like this, the boundary between professional and ethical conduct is necessarily blurred: the one cannot exist without the other.

To ensure that they engage with clients both professionally and ethically, Professional Accountant (SA) need to follow these three guiding principles:

  • Begin with a well-drafted letter of engagement. A letter of engagement is essentially the contract that sets out what services the Professional Accountant (SA) is going to provide, and all other material facts relating to the nature and scope of the services. If there is any dispute, or a Professional Accountant (SA) comes before SAIPA’s disciplinary committee, this is one of the first things to be considered because everything flows from what was agreed.

 

Most professionals will use a template to save time, but each engagement is unique—make sure the template is adjusted to reflect the true nature of the engagement.
It is important to watch out for scope creep or amendments. It is quite common for clients to expand the work they want done, or to request additional services (such as doing personal tax). Make sure that these amendments or additions are noted either in an addendum to the original letter of engagement or, if appropriate, a new one.

A good letter of engagement will make it clear what a Professional Accountant (SA) has undertaken to provide and thus will make it easier for him or her to deliver what was promised, and thus be both professional and ethical.

 

  • Only undertake what you are competent to provide. Acting professionally and ethically does not just mean being clear about the scope of the engagement; the ethical Professional Accountant (SA) must be certain that he or she has the necessary skills to deliver a good result for the client. For example, a Professional Accountant (SA) might be doing tax for a client and is then asked to help with estate planning—but has not done any for years. In other words, his or her skills are neither honed nor up to date. The ethical approach would be either to partner with a colleague who does have the skills and experience, or to take steps to obtain the necessary skills. At the most fundamental level, it would be highly unethical to deliver substandard services knowingly.
  • Maintain confidentiality… except when the law is being broken. Clients have a reasonable expectation that the professionals they deal with will never divulge any information about their affairs to a third party.

 

There is one exception. In terms of their ethical code, Professional Accountants (SA) cannot engage with clients in a way that contravenes the letter or the spirit of the law. Across the profession, the same standard has been agreed to offer guidance in this regard. Known as NOCLAR (non-compliance with laws and regulations), the standard is extremely broad and is codified by the International Ethics Standards Board for Accountants (IESBA) into a standard called Responding to Non-Compliance with Laws and Regulations. The NOCLAR standard provides guidance on how to disclose NOCLAR to public authorities without breaching client confidentiality and provides an alternative to simply resigning.

It is advisable that clients understand this issue and spelling it out in the letter of engagement would be wise.

As always, ethics and true professionalism turn out to be two sides of the same coin.