When to Issue an Engagement Letter?

Do others wait around for the previous accountant to reply?

Didn't find your answer?

New personal tax client, sole-trader February 2023 business start-up, veriphied for AML and money-laundering ID and passed KYC/risk-assessment.

Previous accountant has very recently been sent a courtesy letter with request for personal tax information, none of which will be needed until next January. 

Client needs help and advice right away regarding his start-up business. I know my AML officer would likely throw a six at my issuing a letter of engagement prior to hearing from the previous accountant (it's a matter that came up in an AML review which, I have to say, I silently disagreed with). The alternative is to leave the client high and dry until his previous accountants bother to respond.

Given the circumstances, would others just get on with it and issue an engagement letter pronto? 

Replies (36)

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By Tax is always taxing
01st Mar 2023 10:25

Yep, I would just crack on.

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Replying to Tax is always taxing:
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By I'msorryIhaven'taclue
01st Mar 2023 19:05

My sentiments too. Two-nil then.

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By Wanderer
01st Mar 2023 10:35

Well you write to the previous adviser asking if they have any information which you should consider when deciding to accept an engagement. So I would wait.

ICAEW gives specific guidance covering the situation when there is a lack of response.

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Replying to Wanderer:
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By I'msorryIhaven'taclue
01st Mar 2023 12:26

I'm trying to imagine just what information the previous accountants might impart that would - from an AML viewpoint - make any difference in this particular case.

They certainly wouldn't be able to tell us anything that might be construed as tipping off.

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Replying to I'msorryIhaven'taclue:
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By Wanderer
01st Mar 2023 12:36

Not convinced that AML is the main reason for the required exchange of letters. We used to go through the process before AML was a thing.

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Replying to Wanderer:
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By I'msorryIhaven'taclue
01st Mar 2023 18:42

Thanks Wanderer,

I get all the legal & practical reasons why we wouldn't want to lumber ourselves with the responsibility of a client's (say) payroll or VAT return or some other document on a tight filing deadline; not before receiving handover info.

Maybe I'm paying too much attention to AML rules (or their interpretation thereof according to my AML officer. (Eeeek!)

It's reassuring to touch base with others at the sharp end, and harvest their opinions. Thank you!

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By WhichTyler
01st Mar 2023 10:37

What would your AML officer say if the previous accountant never replies? You can always disengage if they come back with something serious....

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Replying to WhichTyler:
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By I'msorryIhaven'taclue
01st Mar 2023 12:35

WhichTyler wrote:

What would your AML officer say if the previous accountant never replies?

"Write again", probably.

WhichTyler wrote:

You can always disengage if they come back with something serious....

Hmm... we do happen to have a zero notice period disengagement clause in our LofE.

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By ireallyshouldknowthisbut
01st Mar 2023 10:53

I would say being commercial is more important than paperwork, so long as it all catches up in the end.

Others will disagree.

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Replying to ireallyshouldknowthisbut:
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By I'msorryIhaven'taclue
01st Mar 2023 19:00

I watched in impotent despair today as the client (or, more properly I suppose, prospective client) jockeyed to crack himself a deal Dragon's Den style.

I cannot advise him until formally appointed; and if being formally appointed means waiting around for a reply (or not) from the previous incumbents then surely it's time I threw in the towel. Mission Impossible!

Maybe it's time we sent the AML Police on a course or two.

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Ivor Windybottom
By Ivor Windybottom
01st Mar 2023 10:59

How about a phone call to the old agent, just to confirm that they are not going to come up with anything against you acting?

Note for the file and then maybe the AML police will be happy?

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Replying to Ivor Windybottom:
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By I'msorryIhaven'taclue
01st Mar 2023 18:45

Good idea. That's gone on my to do list.

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Replying to Ivor Windybottom:
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By I'msorryIhaven'taclue
01st Mar 2023 18:58

Erratum.

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Replying to Ivor Windybottom:
By Moonbeam
03rd Mar 2023 11:30

But if another accountant rang you, how would you ID them to ensure you were talking to who they said they were?

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Replying to Ivor Windybottom:
By Moonbeam
03rd Mar 2023 11:32

But if another accountant rang you, how would you ID them to ensure you were talking to who they said they were?

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Replying to Moonbeam:
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By I'msorryIhaven'taclue
03rd Mar 2023 12:39

A two-stage system of reply would work more smoothly:
1. Immediately - No objections email or letter;
2. A week or two further on - here's the paperwork.

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By Duggimon
01st Mar 2023 11:18

In my own experience there's maybe a 70% response rate to these requests, if we waited for the reply from the previous accountants in all cases we'd never engage 30% of new prospects.

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Replying to Duggimon:
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By I'msorryIhaven'taclue
01st Mar 2023 18:49

Thanks Duggimon,

For what it's worth I'm not holding my breath on a reply anytime soon (Liberian flag case).

You're a man (or woman) after my own heart - sign them up before they lay themselves open to ruin! Thank you for that.

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By CJaneH
01st Mar 2023 11:54

I would make an effort to chase reply from previous accountant, phone, email etc, record effort on file. Perhaps issue engagement letter specific to new business and issue full engagement letter later.

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Replying to CJaneH:
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By I'msorryIhaven'taclue
01st Mar 2023 12:30

Thanks, I'd thought about a single project LofE to specifically cover the new start-up business, and I guess that would be alright were the start-up incorporated (it isn't).

Seems a bit messy to have two accountants though; too many cooks!

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Kitten
By Hazel Accounts
01st Mar 2023 13:01

Any idea why they aren't responding - I've had one recently and the reason the client changed accountants is because the previous one just stopped responding to her (believed there may have been some ill health issues) and filing deadlines were approaching.

ACCA advise is to "send a further letter by recorded delivery service.
This letter should state that, unless a reply is received within a
stated period, the prospective accountant will assume that there are
no matters of which they should be aware and, at the end of the
stated period, will proceed to accept the appointment".

So try that, then (as you say everything else checks out) issue your engagement letter and start work.
Why should client suffer due to ex-accountant.

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Replying to Hazel Accounts:
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By I'msorryIhaven'taclue
01st Mar 2023 17:52

Thanks Hazel,

That's really useful procedures which I shall store for further along the line.

In this case particular case I've only just written to the outgoing firm at the end of last week, so ordinarily wouldn't expect to hear for a few weeks yet given that, from their perspective, there's nothing on the boil until next tax season.

Meanwhile (unbeknown to them) matters are gathering pace as the client has this afternoon made a tentative offer to buy the business he's starstruck with (a true twist in the plot, Agatha Christie style).

Maybe I've been too brainwashed by the AML police recently, but it seems eminently sensible to engage sooner rather than later; regardless of any supposed rules to the contrary.

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Replying to Hazel Accounts:
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By Calculatorboy
02nd Mar 2023 09:29

Recorded delivery ? Seriously ? I'm surprised they don't say use a pigeon.

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By Roland195
01st Mar 2023 13:39

If it's a February 2023 business start up, what does the prior accountant possibly have to tell you of relevance even if they acted in a personal tax capacity before?

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Replying to Roland195:
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By I'msorryIhaven'taclue
01st Mar 2023 18:00

Good point, Roland.

Frankly I don't give a monkey's fig if (let's suppose) they've fallen out and/or there are outstanding fees. I'm a big boy and can trust my own judgement over such matters.

This is all about the AML aspect - I'm uncomfortable with the idea of hanging around on the sidelines whilst the client digs himself into a hole.

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By Winnie Wiggleroom
01st Mar 2023 13:40

I don't quite see what AML has to do with it, if for example the previous accountant had found something dodgy going on they wouldn't tell you anyway, these days its probably 50/50 whether you will get a reply anyway, and I have never once in 25 years had anything other than the usual "no probs go ahead" reply.

So I say go for it, fill yer boots.

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Replying to Winnie Wiggleroom:
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By I'msorryIhaven'taclue
01st Mar 2023 18:33

I agree wholeheartedly with your sentiment. Apparently whatever the outgoing bod has to tell me might just impact my assessment score.

But that's just the AML police interpretation of matters. And "law" - AML "law"/rules included - must necessarily (in my book) be subject to the normal interpretation of rule/exception.

It's so interesting / reassuring to hear others' real world applications.

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Replying to I'msorryIhaven'taclue:
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By Hugo Fair
01st Mar 2023 19:10

... which are what matter - and where this site can really come into its own.

I suspect that, for all the right reasons, you've almost OD'ed over the past few weeks with your LoE and then AML 'projects' (wood for the trees and all that).
It's one of the classic dangers of getting too embroiled ... it starts as research & then becomes almost fun as an intellectual exercise, before slipping without warning into the realms of academe (leaving the practical world in its wake)!

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Replying to Hugo Fair:
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By I'msorryIhaven'taclue
02nd Mar 2023 09:02

Thanks Hugo, I think you're right.... I've disappeared up my own exhaust pipe!

My embroilment is more to do with a recent AML inspection as a result of which my Policies and Procedures manual was adjusted to accommodate the eleventh commandment Thou shalt not issue LofEs before the previous accountants reply.

Which, ordinarily, may be good common sense and a jolly fine display of ethics; notwithstanding which it's reassuring to know how others in the front-line trenches would deal with a square-peg exception to that rule.

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Replying to I'msorryIhaven'taclue:
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By Winnie Wiggleroom
02nd Mar 2023 09:13

I'msorryIhaven'taclue wrote:

Thanks Hugo, I think you're right.... I've disappeared up my own exhaust pipe!

My embroilment is more to do with a recent AML inspection as a result of which my Policies and Procedures manual was adjusted to accommodate the eleventh commandment Thou shalt not issue LofEs before the previous accountants reply.

Which, ordinarily, may be good common sense and a jolly fine display of ethics; notwithstanding which it's reassuring to know how others in the front-line trenches would deal with a square-peg exception to that rule.

Again I ask "what the devil has it got to do with AML?"

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Replying to Winnie Wiggleroom:
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By I'msorryIhaven'taclue
02nd Mar 2023 09:49

My sentiments exactly, Winnie!

Nevertheless it came up in my AML inspection and I was made to amend my Policies and Procedures document accordingly (on the basis that the information I receive from the outgoing accountant could have a bearing on my decision as to whether or not to engage). Perfect world syndrome!

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By Arcadia
03rd Mar 2023 10:46

Hazel had the answer. The accountancy bodies guidance is to send a second letter, recorded if you want, and then get on with it.

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Replying to Justin Bryant:
By Ruddles
03rd Mar 2023 13:07

Perhaps. But still unwise IMO to proceed without one.

EDIT - I hadn't read the links, so assumed that you were suggesting that no EL is required.

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Replying to Ruddles:
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By Justin Bryant
03rd Mar 2023 13:16

It ain't a sine qua non re fees at least.

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Replying to Justin Bryant:
By Ruddles
03rd Mar 2023 14:13

Agreed. Because it's Friday.

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