When Should a Client Release You From Professional Liability?

Source: Pennsylvania CPA Journal

This article discusses circumstances in which a CPA firm can justifiably ask a client for release from professional liability. Here are two abbreviated examples:

One of the owners of a client company has been using company funds for personal expenses. It is discovered in your audit. The client asks you to also look at prior financial statements. You may later be accused of failing to detect or prevent the improper use of funds. Such a threat may jeopardize your independence. Requesting a release from claims is reasonable in this case and may safeguard your independence.

Suppose a client wants to renegotiate a fee because of some perceived underperformance by you. While you may not agree to the allegation, it may be good business to negotiate the fee. This circumstances calls for a release from liability.

For the complete article, click here and select "Use a Proper Release to Avoid Future Traps" under the caption Liability Lessons.

From Pennsylvania CPA Journal, Pennsylvania Institute of Certified Public Accountants, http://www.picpa.org/, Summer 2009.