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Activity Review
North Carolina State
Board of Certified Public
Accountant Examiners
HOlOberlin Road, Suite 104 • PO Box 12827 • Raleigh, NC 27605 • (919) 733-4222 • No. 07-2005
What Happens to Client Records When a CPA
Leaves the Firm or the Firm Is Sold?
Years ago, a business transaction was
often finalized with a handshake that
represented the participants' intention
to uphold the agreed-upon specifics of
the deal.
Howe/er.intoday'sbusi ness world,
i t i s i nconcei vabl e that w eeks or months
of negoti ati ons w ou I d becond uded w i th
a simple handshake, not a signed con¬
tract.
CPAs usually advise their clients
that a written agreement among busi¬
ness partners i s w i se yet many C PA sfai I
to obtai n a w ri tten ag reement among the
partners or shareholders of their own
firms.
Regardless offriendship, health, or
the number of years spent working to¬
gether, f i rms change, prompti ng theneed
for immediate action.
A CPA may decide to become a solo
practitioner, join another firm, or retire
Heor shemay be unable to work due to
family obligations or failing health.
Do you know what steps to take
regarding client records if the firm is
dissolved? Who takes custody of the
record s i f a partner or sharehol d er I eav es
the firm?
What action should be taken if a
CPA employee leaves the firm? What
happens to client records if the firm is
sold?
Although there is no single set of
rulesorlawsthatdi recti
у
ad d resses al I
considerations and circumstances of
such events, there are some well-estab¬
lished professional obligations regard¬
ing the notification of clients and the
dispensation of client records.
Thespeci f i carrangements may vary
from firm to firm, but in all cases, the
clients must benotified and provisions
shou I d be mad e to al I ow cl i ents access to
their records.
So, what action should betaken if
the firm is dissolved?
Priortothefirm'sdissolution, each
client should be sent a letter explaining
the dissolution and offering to send a
copy of thecl i ent' s record s el sew h ere ( at
the client's direction and with a signed
release).
If, in your firm, clients are serviced
pri mari ly by onefi rm member and do not
havea rel ati onshi p w i th otherf i rm mem¬
bers, then each f i rm member may take
responsibility for his or her clients'
records.
However, clients must not be led to
believethatthey must conti nuethecur-
rent CPA -client relationship— each cli¬
ent should be given the opportunity to
choosewhowill behisorherCPA after
the firm's dissolution.
Because the dissolution of a firm
maynotbecompletedfor several months,
arrangements should be madefor client
records to be centrally maintained both
during and after thedissolution.
In the e/ent that a client fails to
respond to the notification of thefirm's
dissolution,hisorherrecords,aswellas
any records not i n the custody of a fi rm
member, must continue to be centrally
maintained.
I f a p artn er or sh areh ol d er I eaves the
fi rm but thef i rm conti nu es to exi st, each
dientshould benotified ofthepartneror
shareholder's departure from thefirm.
IftheCPA planstocontinuepractic-
ing, his or her new address and phone
number should be made available to
those clients who wish to continue the
CPA-client relationship with that par¬
ticular practitioner.
Client Records
continued on page 4
www.cpaboard.state.nc.us
Inside this issue...
2005 Board M eeting Dates . 4
Audit Committee Tool kit . 5
Certificates Issued . 4
Di sci pi i nary A cti ons . 2
FA SB Statement N o. 154 . 3
Firm Registration . 4
Firm WebSites . 5
Exam Fees . 5
Inactive Status . 7
Notice of Address Change . 8
Retired Status . 3
