Member Advisory Alert: Are You in the Practice of Public Accounting?
Beyond Numbers · April 2009
As the April 30th tax-filing deadline fast approaches, many of you may be asked to do tax returns for family members, friends, or non-profit organizations such as your local church or community centre. Moreover, the changing business, reporting, and regulatory environments have increased demand for members to provide consulting services to help companies meet reporting requirements, implement new standards, and deal with the current economic downturn, so you may find more such opportunities coming your way.
It is important you are aware of the regulatory requirements involved before agreeing to offer your skills and services to ensure you do not inadvertently cross the line into the practice of public accounting (PPA).
Whether you’re working as a consultant, a part-time controller, or a CFO, or whether you’re just preparing a few tax returns for family or friends—even pro bono or one time only—you could fall under the PPA definition, which would require you to be licensed and insured.
Do you fall under the definition of the practice of public accounting?
Whether the services you provide fall under the PPA definition depends on the nature of your role and how this role is perceived by your client and (where applicable) the stakeholders.
1. What is the nature of the service(s) you’re providing?
The type of services and advice you provide will determine whether you’re practising public accounting. Generally speaking, if you are advising on taxation and accounting matters, you risk crossing the PPA line, irrespective of the number of clients you may have.
Specifically, in addition to including assurance-related services, the definition of PPA, as outlined in Bylaw 100, includes the following services:
- “Providing an accounting service insofar as it involves summarization, analysis, advice, council or interpretation,” and
- “Providing advice, counsel, interpretation with respect to taxation matters.”
Certain services are excluded from the PPA definition in Bylaw 100, including services related to: insolvency and liquidation, IT consulting, mergers and acquisitions, management consulting (with regard to policy and procedures), data processing, and personal financial planning.
2. How is your role perceived?
If you’re consulting with a company, consider how your role is perceived—both by the company and its stakeholders. For example, does the company consider you to be an employee or an external advisor? If it considers you to be an external advisor and you’re advising on tax and accounting matters, you may be practising public accounting. Similarly, are you introduced to stakeholders as the company’s CFO or as its CA? If you’re introduced as the CFO, stakeholders will likely perceive you as an employee, whereas if you’re introduced as the company’s CA, you may be perceived as an external advisor. The latter perception may put you in the practice of public accounting.
Conversely, if the company has provided you with business cards and/or your own office, and/or you have staff members who report to you, you may be perceived as an employee of the company, which may put you outside of the definition of the PPA.
A guideline regarding insurance: If you’re consulting with a company, protect yourself against potential legal action by ensuring that your role and responsibilities are covered by the company’s insurance policy. In addition, have a written contract that specifies your responsibilities and the terms of the engagement, including a limitation of liability clause.
Are you preparing tax returns?
If you’re preparing free tax returns for family members or individuals at tax clinics, churches, or senior centres, you are practising public accounting, and Bylaw 100 requires that you be licensed and insured. In pro bono cases such as these, the Institute will waive your license fees, but please note that you will still be subject to licensing and practice review requirements.
A guideline regarding insurance: If you’re preparing tax returns through a large organization or firm, you may be covered under the organization/firm’s liability insurance. If not, you could be exposing yourself to financial risk and will need to purchase liability insurance—so be sure to check with the organization or firm regarding coverage.
If you’re in doubt or have any questions about the issues discussed in this article, please contact us
at the Institute. You can speak to Taj Haer, CA, the Institute’s director of Advisory Services, at
firstname.lastname@example.org or 604-488-2621, or Lisa Eng, CA, the director of Practice Review and Licensing,
at email@example.com or 604-488-2622.
- The complete definition of the practice of public accounting is provided in Part 1 of the Institute’s bylaws, which are available on the ICABC website at www.ica.bc.ca under Regulatory Matters>Standards>CA Act, Bylaws & Rules (BC).