Why Canadian accountants need a CEWS client engagement letter now more than ever

An engagement letter that outlines the scopes and responsibilities of both parties should be obtained for any service that accountants provide, says Bridget Noonan, CPA, CA, of Clearline Consulting.

TORONTO, Aug. 4, 2020 – With the Canadian government extending the Canada Emergency Wage Subsidy (CEWS) program to the end of the year, accounting professionals are in need of practice resources that will simplify workflow, support practice management and mitigate the risk of scrutiny from the Canada Revenue Agency. 

As many employers continue to struggle during the current COVID-19 pandemic, the Senate passed new legislation in late July, amending the Income Tax Act and redesigning CEWS through Bill C-20, “An Act respecting further COVID-19 measures,” featuring increased subsidies and lower thresholds. 

The three-part Bill affects accounting practitioners, advisors and estate planners across Canada, from the extension of the program into the winter to the elimination of a revenue decline threshold to new CEWS subsidy calculations to a new appeals process to the Tax Court of Canada. See “CEWS Update – Detailed Tax Commentary On The CEWS Amendments In Bill C-20,” from McCarthy Tétrault LLP, for details. 

Practitioners already under pressure

Canadian accountants were already dealing with accelerated change due to the pandemic, a delayed tax season and the practice pressures of staff working from home. They now face the additional pressures of further changes to the rules that affect their clients, particularly small to medium-size businesses struggling to survive during COVID-19. 

“Many firms are so busy assisting clients that little consideration is given to practice management and risk mitigation,” says Bridget Noonan, CPA, CA, an assurance partner of Clearline CPA and co-founder of Clearline Consulting. Noonan and Clearline co-founder Tom Gillespie, CPA, CA, have created a Client Engagement Letter for CEWS Application Assistance that can be downloaded from Clearline Consulting. 

“Whether or not you charge additional fees for these services, or advisory services are already built into your pricing model, is your decision,” says Noonan. “But an engagement letter that outlines the scopes and responsibilities of both parties should be obtained for any service we provide.” 

Difficult times can lead to difficult situations

These are difficult times for many organizations, times when practitioners need to take account of the personal and professional pressures they face. Understandably, says Noonan, “practitioners tend to respond off the cuff — and rationalize a few tweaks here and there — when peoples livelihoods are at stake. But they may do so “without ensuring clients realize there are significant changes to COVID-related government subsidies and all are still subject to interpretation and future CRA scrutiny.” 

The sample engagement letter for CEWS applications, which can be modified for other COVID-19 related consultations, provides a template that can be easily modified for firm-specific requirements. Also included is the Canada Emergency Wage Subsidy Attestation Form. It’s just one of many practice-related resources offered online by Clearline Consulting. 

Whether you are assisting clients in the application for CEWS or advising on the availability of funding, such as qualification for the Canada Emergency Business Account (CEBA), practitioners should consider the following risk mitigation steps:

• Stay up to date on all legislation and interpretations (sign up for Clearline CPA’s newsletter).
• Obtain an executed engagement letter (including scope of services and limitation of liability).
• Retain client provided support upon which you based your conclusions or calculations.
• Obtain client sign-off that information provided was accurate (such as the CRA attestation letter).
• Provide all advice in writing (yes an email works) and include a disclaimer.

How long will this last?

Canada’s most populous urban centre, the Greater Toronto Area, has now moved into Stage 3 of its reopening, with daycares, schools, restaurants and bars allowed to reopen with social distancing measures in place. In other areas of Canada, where reopenings are in later stages, outbreaks of COVID-19 have reappeared. 

Epidemiologists have long warned that COVID-19 could return in force in the fall. Experts warn that now is not the time to be complacent. Until researchers find a COVID-19 vaccine, a second wave of the coronavirus is likely unavoidable. 

For Canadian accountants, further extensions and changes to COVID-19 relief and support programs are a real possibility. Noonan expects that more accounting clients will need assistance than in previous months. CEWS extensions, subsidy calculations and a government eyeing tax changes to offset lost revenue will keep sole practitioners and accounting firms busy for months to come. 

The Client Engagement Letter for CEWS Application Assistance is available for purchase at Clearline Consulting. Sign up for the Clearline CPA newsletter for additional information and practice-related resources. Colin Ellis is a contributing editor to Canadian Accountant.