If you want a way to better serve your clients, to provide additional services and to lower your practice risk all at the same time, then read on.Recently, I attended a workshop in which Ron Klein, an attorney and vice president of claims for Camico Mutual Insurance Co., talked about jury verdicts against CPA firms. He said that many juries disregard the disclaimer that CPAs place in their engagement letters regarding fraud, and that, by and large, juries think the CPA should know about all fraud involving a client for which the CPA is preparing a reviewed or compiled statement.
Of course, we all know that this is not the case and is simply ridiculous.
"It doesn't matter what you and I think. All that matters when you get hauled into court, particularly with a company that has failed, is what the jury thinks. Juries are looking for someone at fault and who can pay," he said.
He recommended two services that you should be offering to all of your clients for which you prepare reviewed or compiled statements and perhaps even corporate tax returns.
The first service that every business or organization should be offered is an internal control review. At the very least, an internal control warning letter should be sent to all of these clients and placed into your file. Such a letter should warn the client against assigning related duties to the same person, and recommend that they scrutinize bank statements and reconciliations every month, insist that the check signer also look at proof of all purchases, lock and protect valuables, and watch for significant behavior changes in employees.
By sending such a letter and offering to provide a detailed internal control study for the client, priced at $1,500 to $15,000, you will have proof, if ever needed, that your client accepted or rejected your advice to protect their assets with appropriate internal controls.
The second service is simply to offer the client one surprise bank reconciliation per year. Providing this service will allow you to help provide a measure of protection over the cash assets of the company. Just knowing that you will be examining the bank statement will be a deterrent to many people who are tempted to steal from the account. Of course, you will want to perform proper procedures to compare signatures of check signers to cards on file, compare payees to the check register, examine endorsements, and perhaps even look at some original invoices. This service can be offered at prices ranging from $500 to $1,500 annually.
Many of your clients are concerned about the protection of their assets and will gratefully accept your service recommendations. These services will allow you to increase annual fees for compilations and reviews, and you can provide them during a time of the year that is best for you.
Price this service at a premium and do not use it as a loss leader. This is such a great way to help your clients, improve your service offerings, create premium billings and protect your assets, all at the same time!
Troy Waugh, CPA, MBA, is a consultant to CPA firms and CEO of Five Star3 LLC in Nashville, Tenn.
