Avoiding complaints about fees

CPABC receives a diverse range of complaints from the public each year. Among them are various complaints about fees from the (mostly former) clients of CPAs.

CPABC’s governing legislation does not give us the power to intervene in fee disputes between CPAs and their clients; however, we’re interested in any complaints we receive (more on that later in this article). Complainants sometimes expand fee disputes to include additional allegations, and CPABC can, and does, investigate complaints about fees when it appears that a professional may have breached the CPABC Code of Professional Conduct (CPA Code) during the billing or collection process. Cases we’ve considered thus far include:

• A complaint that an accountant had billed for services that were initially advertised as a “free consultation”; and
• Allegations that an accountant exhibited unprofessional behaviour when attempting to collect fees. In one instance, we sanctioned a member who used a collection agency in an abusive manner and who threatened to increase the billing amount if the client made a complaint to CPABC.

In most cases, CPAs are free to set their fees in any manner they see fit. We’ve seen various methods employed—from hourly billing (the most common practice) to value billing (a set fee for a standard service) to contingent fees (sometimes acceptable). No matter what the method, however, there are certain rules CPAs must follow when it comes to fees.

What are the rules regarding fees?

Rule 214 of the CPA Code states that CPAs must:

• Obtain adequate information from a client before providing a fee quote to perform any professional service; and
• Render bills on a fair and reasonable basis. This includes providing appropriate explanations and details when/if a client requests this information.

Fee estimates

As noted above, before providing a fee quote to a client, CPAs must be confident that they’ve made sufficient enquiries about and have sufficient knowledge of the prospective client’s business to make a reasonable estimate.

The guidance to Rule 214 of the CPA Code also warns CPAs that if they work for a fee that is significantly lower than the fee charged by their predecessor and/or the fees quoted by others, they should consider the impact of this abnormally lower fee on their perceived independence and on the quality of their work. CPAs should be satisfied that any fee quoted to a client for the performance of professional services is sufficient to ensure that they remain independent of said client and that due care will be applied to comply with all professional standards when performing these services. In other words, it is not acceptable to cut corners in order to charge a low fee.

Contingent fees

Rule 215 of the CPA Code contains important requirements regarding contingent fees (i.e., fees that are dependent on certain outcomes).

The rule prohibits contingent fees when the professional service is:

• One that requires independence, per Rule 204 (this mainly applies to assurance work);
• A compilation engagement; or
• Preparation of an income tax return.

Excluding the professional services just described, CPAs may offer to perform services for a contingent fee provided that the client has agreed to the contingent fee structure in writing—and in advance. Even then, however, CPAs should consider the impact of the contingent fee on their perceived objectivity, and they should refrain from using this billing method when their objectivity could be reasonably questioned.

The guidance to Rule 215 gives examples of when a contingent fee would be considered an impairment to a professional’s objectivity, and they include:

• Valuation engagements involving an expression of a professional opinion;
• Circumstances in which a CPA assists with the purchase or sale of a business; and
• Business interruption insurance claims.

Fee disputes are often a product of poor communication.
Be prompt, be specific, and be detailed.

What are best practices in fee billing?

Fee disputes are often a product of poor communication on the part of the professional. Resolving—and, better yet, preventing—these kinds of disputes often comes down to timely communication. The following practices are not explicitly required by the CPA Code or CPABC Bylaws, but these suggestions will help ensure that bills are paid faster and that complaints are kept to a minimum.

• Put your expected fees in writing. Setting and agreeing on the fee is best done up front, when the value to the client is top of mind. (Conversely, your weakest bargaining position is after you have delivered the service.) Your engagement letter should specify both the fee you’ve agreed on and the service you expect to perform. The more comprehensive your fee schedule, the more likely your client will understand what they’re paying for.
• Bill promptly. Many bill-related complaints have to do with timeliness. The most effective billing systems are those that issue bills at the same time as services are delivered, as these systems enable clients to see a direct correlation between the bill and the service rendered. The least effective systems are ones in which bills are issued much later—especially when they are larger than originally anticipated.
• Reduce the element of surprise. Communicate with your client as soon as possible if you think your fee will be larger than expected, and update your estimate of fees regularly if/as needed. Be detailed in explaining any increases, so your client can course-correct before the engagement is completed. For example, if your client caused an increase in your costs because they failed to respond to questions or deliver documents on time, you should tell them so promptly.
• Get a retainer, especially for new clients. Most CPAs don’t get a retainer up front, but the practice is much more commonplace in some other professions. Retainers demonstrate to clients that your time is valuable and that they must pay for it, and that your services are in demand. Assuming you’ve rendered good service, clients are less likely to dispute a billing if it is covered by a retainer.
• Self-reflect. Are you proud of the service you delivered to your client? Did you deliver this service accurately and on time? Did you respond to your client’s concerns and communications in a timely manner? If you answered “no” or “I’m not sure” to any of these questions, there is a greater likelihood that your client may be dissatisfied with your services and/or the ensuing bill.

Recall also that your worth as a service provider goes beyond your fee. Ultimately, clients will make the choice of working with you based not only on their valuation of your direct services but also on your trustworthiness and on the quality of their relationship with you. If they believe your services are essential to their financial well-being, they are likely to stay as on clients—even if they could get a lower fee from someone else.

What about fee disputes that don’t involve the CPA Code?

CPABC offers a free and voluntary fee resolution service. Both parties must agree to participate in the process to access this service, and the significant terms are as follows:

• Both parties must enter into a written fee resolution agreement;
• Any collection actions must be ended;
• The unpaid balance of the fees in dispute, including any taxes and interest, must be placed in trust with CPABC’s solicitors;
• The fee resolution is final and binding, with no appeal; and
• Reasons for the determination will not be provided to either the client or the CPA involved.

Files are accepted when the outstanding (unpaid) fees are more than $3,000 before taxes and interest. Files are not accepted in cases where the fees have already been paid by the client.

Do you need guidance?

CPAs must always act with integrity and due care, and must never behave in a manner that brings the profession into disrepute. CPABC has professional standards advisors who are here to help you comply with the CPA Code when navigating difficult situations. All guidance is confidential.

In complex cases, you may also want to consider obtaining independent legal counsel.

The Chartered Professional Accountants Act, CPABC Bylaws, CPABC Bylaw Regulations, and CPABC Code of Professional Conduct can be accessed online here.

Comments or questions about this article? Contact the professional conduct department at professionalconduct@bccpa.ca.