Ask Uncle Tom
What’s in an appellation? Take “Kiwi” for example.
I worked for several years in Australia, and one of the persons who was on the same engagement kept introducing me as his Kiwi colleague, which made me cringe a bit. I said I preferred to be called a New Zealander as the term Kiwi had ever so slightly pejorative overtones, and tended to be favoured by politicians trying to be matey.
Take for instance “Kiwi drivers” (an epithet frequently heard in my car when navigating the Hutt Road in the morning and evenings), Kiwi Cards for welfare assistance, and the Kiwi rugby league team. Now don’t get me wrong, and I’ve nothing against league, but you do have to acknowledge that the Kiwis’ performance has been patchy at best, and far eclipsed by the All Blacks.
Then there are two Kiwi airlines that have gone bust, one in fraudulent circumstances. And there’s Kiwi Rail, the less said about it the better. There was a saying current in Wellington a while ago: “Walking’s good for you – travel Kiwi Rail.”
And finally there’s the product which apparently has the highest recognition world-wide for the word kiwi. Drum roll, please – Kiwi shoe polish! Until very recently this admirable product (developed in Australia, by the way) was owned by a large food company, a matter which on its own might cause some concern.
My Australian friend continued on. “We have the wallaby, you have the kiwi, what’s the problem?”
I pointed out the Australian habit of shortening words and pluralising them. That meant their term for their rugby team, Wallabies, should really be shortened to Wallys, and that he shouldn’t get upset if I called them a bunch of Wallys. He said that was a pretty fair description right now, and, okay, I could be a New Zealander.
The flavour of the month, the last few months actually, for Professional Support has been squabbles over the transfer of clients. I use the word “squabbles” deliberately rather than “disputes”, as some of these situations seem like they’ve come straight out of Gilbert & Sullivan.
So far the count is three trespass orders against people and an anti-harassment order (a new one for me).
“What else can I do?” one practitioner asked me regarding his obtaining a trespass order. “Here’s this guy in the middle of my office, doing a ritual haka, abusing my people, and refusing to leave without his records.”
In that case my cynical mind suggests there was a degree of orchestration behind that particular person’s behaviour, with an additional agenda.
Animosities do arise when clients transfer, particularly if a bunch depart at the same time, something that usually happens when a principal of a firm or a senior staff member leaves to set up on their own.
The normal protocol letter asking about professional reasons should still be sent, and it is not necessary, as one practitioner tried to insist, that a separate letter be sent in respect of each transferring client. One letter listing all the transferring clients is fine.
The existing accountant should respond to that letter within seven days, but if they fail to do so, the proposed accountant should send a further letter after a reasonable time, say, two weeks, saying that as they have not heard to the contrary they presume there are no professional reasons why they should not accept the clients.
If you want to read the chapter and verse refer to paras 164 through 177 of the Code of Ethics on the NZICA website.
On two occasions recently we’ve had reported to us instances where accountants have advised that clients were transferring to them, and it turned out that no one had told the clients of this!
If you are the existing accountant, and you have concerns over a transfer advised by a new accountant, you are quite entitled to ring the client and check this out. It might be a good idea to do so anyway, as it gives you the opportunity to woo them back. One practitioner discussing a bulk transfer of clients exclaimed: “Woo them back? He’s doing me a favour. I’ve got a few clients I think I’ll ring and suggest they move as well!”
Then there’s the question of “professional matters” as mentioned in para 170 of the Code of Ethics. This is usually interpreted as asking if there is anything that ethically prevents an accountant from accepting a client engagement.
Although are probably quite a few reasons why an existing accountant believes that a proposed accountant should turn a client down, I can only think of one where ethically this should be done. This is when auditors are being blackmailed by the threat of being replaced unless they concur with some particular treatment the client wishes to adopt, or variations on that theme. Even then the proposed new auditors should satisfy themselves that the existing auditors’ stand is reasonable.
Unpaid fees are not a reason to bar a change in accountants, although their existence should give a new accountant pause to think whether this is really a client they want.
The true reason for the protocol letter is to allow the proposed new accountant a chance to learn things about the client which the client may have been reluctant to disclose and which, if known, might cause the new accountant to back away rapidly. Tax evasion on the part of the client is an obvious one.
However, before the existing accountant can pass on these titbits to the new accountant they must have the client’s authority to discuss its affairs with the new accountant. The client can be advised that this sort of exchange of information is normal when clients transfer, and is helpful in achieving a smooth transition.
However, if the client refuses permission then all the retiring accountant can do is advise the incoming one that there are matters they would like to discuss but the client has refused permission for this. That should put the newbie on full alert, and if they take on the client without a satisfactory explanation of why they can’t talk to the old accountant, then on their heads be it.
Then follows the transfer of records. Please, please be reasonable and don’t get picky over what to pass over.
Firstly, the client’s records have to be transferred. Client records generally include such things as ledgers, journals, cash records, minute books, legal documents, and material actually received from the client or from other parties for use in dealing with the client’s affairs. It does not include the practitioner’s own work papers.
Secondly, copies of workpapers should be provided to the new accountant (not necessarily to the client) when these are required by the new accountant to pick up where the existing accountant left off. Typically these would include work papers supporting tax calculations and GST and bank reconciliations, and the nature of the work performed for the client will dictate what others there might be.
Correspondence to and from the firm is usually not required to be transferred unless its contents would be useful to the new accountant.
If it is helpful for the new accountant (and it usually is), transfer records in electronic form. These days there is usually no problem in transferring material in pdf format. Indeed, businesses are more and more moving away from storing hard copies, and scan documents instead for electronic storage. However, as regards accounting papers and records received from clients it would be best to return the hard copies if requested (and that absolves you of storing them).
Where time needs to be spent in extracting records and collating and despatching them it is acceptable to charge for this, together with associated costs such as copying and couriering, but the charges must be reasonable, reflecting the cost and not including a “penalty” element.
How long should all this take? There’s no set time, but it should be attended to promptly. Where only one or two clients are involved I would regard more than a fortnight as excessive. if a whole block of clients is transferring the process could take longer, and I suggest the two accountants discuss and agree a suitable timetable.
If there are outstanding fees then the transfer process, both of records and information, can be stalled until the fee situation is sorted. If you want the jargon, it’s called exercising a possessory lien and is a common law right, not an NZICA rule. I discussed it at length in the October 2011 issue of the Journal. Okay, so you haven’t kept a copy – you can access it on the NZICA website via the library link. There’s also a good booklet on the subject available on the website called “Possessory Liens and the Ownership of a Chartered Accountant’s Workpapers”. It’s worth printing off.
The important thing about a lien is that you hold something and will not release it until something else is achieved, such as payment of fees. An interesting twist was proposed recently by a member who erred tactically in releasing final tax returns, to a client notorious for slow paying, before collecting the outstanding fees. The client promptly filed the tax returns himself. The member is now considering including a paragraph in his engagement letters extending his powers of lien to information held by others. I don’t think that’s going to work. The information was out of his possession and he had lost the physical control that is the essence of a lien. His only remedy would be to sue, and he could do that anyway for the outstanding fees if things descended to that level.
Back on this kiwi theme. I’ve always been puzzled why we have such a nondescript looking bird as a national symbol. It’s not colourful, it can’t fly, and is not particularly musical to listen to. Admittedly, its feathers are very good for making successful trout flies, but that’s a complete no-no.
There must be very few New Zealanders who have ever seen one properly. You usually have to go into a special night enclosure, sit for half an hour while your eyes adjust, and then you may see a shadowy something moving in the far distance of the enclosure.
I feel a little envious of nations which have magnificent eagles, birds of paradise, albatrosses and the like as national symbols, while we have a funny little bird that grubs around in the bush at night. At least we don’t have double-headed eagles, and it’s remarkable how many nations and empires adopted this peculiar bird. It does seem like the kiss of death as the empires that adopted it, Sumerian, Hittite, Byzantine, Czarist Russia and the Austro-Hungarian empires (isn’t Wikipedia wonderful?), have all gone to dust. And there are not that many double-headed eagles flying around these days.
Clearly it must be linked to humans and climate change, and I fully expect to be accosted on the street by a clipboard-bearing student soliciting contributions for the preservation of the habitat of the endangered double-headed eagle. I expect in the course of a day he’ll do quite well.
- Tom Davies