Ethics Articles

Records Requests

by MICPA | Jun 03, 2014   ()

The Michigan Association of CPAs (MICPA) Professional Ethics Task Force has seen an increase in inquiries from CPAs and the public related to the return of records, whether requested by a client, former client, or successor CPA. The AICPA Professional Code of Conduct, also adopted by reference in MICPA Bylaws, speaks specifically to this issue, and the responsibilities of members when such a request is made.

1.400.200
Terminology

.01 The following terms are defined here solely for the use with this interpretation:

  1. A client includes current and former clients.
  2. A member means the member or the member’s firm.
  3. Client-provided records are accounting or other records, including hardcopy and electronic reproductions of such records, belonging to the client that were provided to the member by, or on behalf of, the client.
  4. Member-prepared records are accounting or other records that the member was not specifically engaged to prepare and that are not in the client’s books and records or are otherwise not available to the client, thus rendering the client’s financial information incomplete. Examples include adjusting, closing, combining, or consolidating journal entries (including computations supporting such entries) and supporting schedules and documents that the member proposed or prepared as part of an engagement (for example, an audit).
  5. Member’s work products are deliverables set forth in the terms of the engagement, such as tax returns.
  6. Working papers are all other items prepared solely for the purposes of the engagement and include items prepared by the
    1. member, such as audit programs, analytical review schedules, and statistical sampling results and analyses.
    2. client at the request of the member and reflecting testing or other work done by the member.

      Interpretation

      .02 Members must comply with the rules and regulations of authoritative regulatory bodies, such as the member’s state board(s) of accountancy, when the member performs services for a client and is subject to the rules and regulations of such regulatory body. For example, a member’s state board(s) of accountancy may not permit a member to withhold certain records, even though fees are due to the member for the work performed. Failure to comply with the more restrictive provisions of the applicable regulatory body’s rules and regulations concerning the return of certain records would constitute a violation of this interpretation.

      .03 The member should return client-provided records in the member’s custody or control to the client at the client’s request.

      .04 Unless a member and the client have agreed to the contrary, when a client makes a request for member-prepared records or a member’s work products that are in the member’s custody or control and that have not previously been provided to the client, the member should respond to the client’s request as follows:

  1. The member should provide member-prepared records relating to a completed and issued work product to the client, except that such records may be withheld if fees are due to the member for that specific work product.
  2. Member’s work products should be provided to the client, except that such work products may be withheld.
    1. if fees are due to the member for the specific work product;
    2. if the work product is incomplete;
    3. if for purposes of complying with professional standards (for example, withholding an audit report due to outstanding audit issues); or
    4. if threatened or outstanding litigation exists concerning the engagement or member’s work.

.05 Once a member has complied with these requirements, he or she is under no ethical obligation to

  1. comply with any subsequent results to again provide records or copies of records described in paragraphs 03-04. However, if subsequent to complying with a request, a client experiences a loss of records due to a natural disaster or an act of war, the member should comply with an additional request to provide such records.
  2. retain records for periods that exceed applicable professional standards, state and federal statutes and regulations, and contractual agreements relating to the service performed. [Prior reference: paragraph .02 of ET section 501]

.06 A member who has provided records to an individual designated or held out as the client’s representative, of such as the general partner, majority shareholder, or spouse, is not obligated to provide such records to other individuals associated with the client. [Prior reference: paragraphs .377-.378 of ET section 591]

 

.07 Working papers are the member’s property, and the member is not required to provide such information to the client. However, state and federal statutes and regulations and contractual agreements may impose additional requirements on the member.

 

.08 In fulfilling a request for client-provided records, member-prepared records, or a member’s work products, the member may

  1. charge the client a reasonable fee for the time and expense incurred to retrieve and copy such records and require that the client pay the fee before the member provides the records to the client.

     

  2. provide the requested records in any format usable by the client. However, the member is not required to convert records that are not in electronic format to electronic format. If the client requests records in a specific format and the records are available in such format within the member’s custody and control, the client’s request should be honored. In addition, the member is not required to provide the client with formulas, unless the formulas support the client’s underlying accounting or other records or the member was engaged to provide such formulas as part of a completed work product.
  3. make and retain copies of any records that the member returned or provided to the client.

.09 A member who is required to return or provide records to the client should comply with the client’s request as soon as practicable but, absent extenuating circumstances, no later than 45 days after the request is made.

 

.10 The fact that the statutes of the state in which the member practices grant the member a lien on certain records in his or her custody or control does not relieve the member of his or her obligation to comply with this interpretation. [Prior reference: paragraph .02 of ET section 501]

 

.11 A member would be considered in violation of the “Acts Discreditable Rule” [1.400.00] if the member does not comply with the requirements of this interpretation.

Source: The Michigan Association of CPAs