What can ICAS consider in fee related complaints?
Every year ICAS’ Investigation Committee receives a number of complaints from individuals who are unhappy with the fees being charged by their accountant. This article looks at CAs’ ethical responsibilities with regards to fees and provides some practical information on how fee complaints can be avoided.
What can ICAS consider in fee related complaints?
Fee complaints occupy a grey area between commercial contractual agreements and the ethical obligations of our members.
Section 330 of the Code of Ethics confirms that ICAS doesn’t t set charge-out rates or otherwise specify the basis for calculating fees. These are considered to be commercial matters to be agreed between the CA and their client.
Therefore, we have only limited powers to consider complaints relating to fees. We can’t become involved in disputes between our members and their client which solely relate to the level of fee being charged as we’re unable to determine whether the fee being charged by the member is reasonable. If this dispute cannot be resolved between the parties, only a court would be able to determine if the fee is properly charged.
We can however consider whether the member has met their ethical obligations with regards to fees.
What are the Code of Ethics requirements in relation to fees?
Section 330 of the ICAS Code of Ethics sets out a CA’s ethical obligations with regards to fees. The requirements include:
- At the earliest opportunity, the CA should discuss and explain the basis on which fees will be calculated with their client.
- Where practical, in advance of the work starting, the CA should provide the client with a fee estimate. The CA should set out which services are covered by the quoted fee.
- The agreed fee arrangements should be confirmed to the client in writing prior to commencing the engagement, preferably within the letter of engagement. Where there is no engagement letter, the CA should confirm the initial discussion in writing to the client as soon as practicable.
- If a fee dispute does arise, the CA should provide sufficient information to the client, without further charge, to enable them to understand the basis on which the fee has been calculated.
- Where the fees charged exceed the quoted fee by more than a reasonable amount, the CA should provide the client with a full and detailed explanation of the increase. The CA should also take steps to quickly resolve any disputes that may arise.
The importance of clear engagement letters is therefore paramount. This forms the contract between the client and the member and ensures that the client is aware of the scope of the work and a member’s responsibilities as well as their own and will help avoid any future misunderstandings or disputes, including fee disputes. Equally, where a member is in the process of ceasing to act for a client, a disengagement letter can be invaluable when clarifying the responsibilities with the client during any handover or withdrawal period, including the fees due from the client, both for past work and any additional work yet to be performed. Further assistance and information on engagement and disengagement letters is available in the General Practice Manual or can be obtained from the Practice Support team.
Where a complaint is submitted to ICAS with regards to fees, then the CA should be prepared to demonstrate that the work carried out for their client was performed to the relevant standard. Further, the CA ought to be prepared to demonstrate that the client has not been misinformed about the basis on which fees were to be calculated. This is particularly important where fees are likely to exceed, by more than a reasonable amount, an initial estimation or agreement of fees given by the CA. In such instances, it is best practice to consult the client, advise them of the implications on fees and obtain their consent to proceed with the additional work.
Case example – retainer fees
In recent years, the Committee has considered a number of invoicing arrangements which depart from the traditional ‘time and line’ method of charging.
One example is feeing clients on a ‘retainer’ basis; clients pay a monthly fee which covers any work undertaken by the accountant in that particular month (services may or may not be restricted in scope).
While there is nothing inherently unethical about such an arrangement, it can carry an increased risk of complaint, as illustrated by the following example:
- CA is engaged to produce annual accounts for a limited company client with a September year-end.
- Fees are paid monthly on a ‘retainer’ basis.
- The client decides to terminate the engagement in July.
- The client complains when the accountant confirms that no work on the accounts has been undertaken and that the six-monthly fees will not be repaid to the client.
- Terms of business do not make it clear what happens on termination of the engagement.
In such cases, clear communication of feeing arrangements between the CA and client is crucial.
CAs are encouraged to take proactive steps to resolve fee disputes if they arise. Further, to avoid a potential fee complaint being submitted to ICAS, CAs are encouraged to review their terms of business and feeing arrangements in light of the requirements of Section 330 of the Code of Ethics.
Further information on specimen terms of business as relates to fees is available in the General Practice Manual, which can be accessed for free by eligible ICAS firms.
If you have any questions in relation to a fee dispute, please contact the Investigations Department on +44 (0)131 347 0271 or a member of our Practice Support team.
