02 July 2020
July 2020

By: Bradley M. Pryba

As a result of the global COVD-19 pandemic, the CPA profession, like all others, is going to have to figure out how to return to serving clients in a dramatically altered landscape. This, to put it mildly, will not be easy. Guidance on returning to work and serving clients comes from a variety of entities at the Federal, State, and local levels with frequent changes and updates. What follows below is merely a snapshot of current guidance on getting CPAs back to work, along with some general issues to be cognizant of as professionals across the US return to the office. 

Before we begin to discuss risks specific to CPAs, we will take a brief look at guidance from the CDC regrading workplace safety requirements. Employees at all levels will be nervous to head back inside, and professionals of all stripes will need to be especially sensitive to employee needs. According to current CDC guidance, here’s what to do right away:

“Establish policies and practices for social distancing. Alter your workspace to help workers and customers maintain social distancing and physically separate employees from each other and from customers, when possible. Here are some strategies that businesses can use:
• Implement flexible worksites (e.g., telework).
• Implement flexible work hours (e.g., rotate or stagger shifts to limit the number of employees in the workplace at the same time).
• Increase physical space between employees at the worksite by modifying the workspace.
• Increase physical space between employees and customers (e.g., drive-through service, physical barriers such as partitions).
• Use signs, tape marks, or other visual cues such as decals or colored tape on the floor, placed 6 feet apart, to indicate where to stand when physical barriers are not possible.
• Implement flexible meeting and travel options (e.g., postpone non-essential meetings or events in accordance with state and local regulations and guidance).
• Close or limit access to common areas where employees are likely to congregate and interact.
• Prohibit handshaking.”

Aside from the social distancing guidelines above, there is guidance regarding building water and ventilation systems, sick leave, PPE for employees and clients who may visit the office, and routine cleaning, among many other topics. The initial risk to your practice will not be from your work product or your clients in the COVID environment, it will be from coworkers and employees. Taking reasonable steps to care for yourself and them, while monitoring updated guidance from authorities, will dramatically reduce your risk profile. 

Once practitioners are comfortable that they have complied to the best of their ability with workplace safety guidance, they can address risk management concerns regarding client services. Generally speaking, during economic downturns, professional malpractice and commercial complaints increase. Conditions caused by the pandemic shutdown such as volatility and a slowing of demand for goods and services, tend to lead to an increase in professional malpractice claims. These conditions will likely persist, and we can expect that there will be a lag between the immediate crisis and the secondary wave of financial hardships when malpractice claims and business disputes will increase. There are many strategies to mitigate risk under these conditions, but the easiest is proper communication with your clients. While this may be more difficult in a work from home environment, extra effort should be directed towards keeping the lines of communication open so as to address concerns as they arise. Most malpractice, professional misconduct, and ethical complaints are lodged by disgruntled clients, so keeping them abreast of changes and workflow while we are in various phases of physical isolation is increasingly important. Of course, each area of practice will have specific compliance challenges to address, and we take a look at some of those below.

First, for tax practitioners, as deadlines have shifted to July ample time has been left for additional complications. Not all tax deadlines have uniformly shifted, so while Federal tax filing and payment due dates were moved to July 15, 2020 and most states followed suit, this does not necessarily mean that all associated filing dates have shifted. It is important to be aware of situations such as deposits into qualified plans and other activities that accountants would advise upon that typically take place at, or near, the same time as the tax deadlines but have not necessarily been impacted by the filing and payment extensions. Sales tax compliance is another area that deserves additional attention. Moreover, you have likely already been involved in advising employers regarding the Employee Retention Credit available to employers who in 2020 experienced: the full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or, a significant decline in gross receipts. Additionally, The Families First Coronavirus Response Act provided for coronavirus-related paid leave for workers and tax credits for small and mid-sized businesses. Depending on the types of clients you serve, you may have also encountered industry-specific relief, such as that designed for air carriers and contractors. Which is to say, there’s an awful lot of moving pieces in the tax space, requiring CPAs to invest heavily in compliance measures so as not to overlook key filing deadlines. This shifting landscape will certainly impact tax planning on a forward looking basis as well, so be sure to adjust accordingly. 

For those advising business clients, the greatest immediate concerns will be in the context of Paycheck Protection Program loans. Hopefully, prior to providing consulting services related to PPP and other similar programs, you executed an updated (or separate) engagement letter for services related to PPP. These services are likely outside the scope of whatever engagement letter you previously had in place with your client. If not, consider issuing a revised letter which includes the services you are rendering under PPP. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by congress and signed into law to provide emergency relief to American businesses in the wake of the disruptions caused by the COVID-19 pandemic. The Small Business Administration (SBA) manages the application process for loans under PPP, which began for small businesses and sole proprietorships on April 3, 2020 and for independent contractors and self-employed individuals on April 10, 2020. AICPA has issued ethical guidance on the independence implications for assisting clients, both businesses and lenders, with the loan process. In order to avoid ethical violations, a few inquiries are worth making: if you accepted an “agent fee” from the lender as compensation for advisory services, this is likely a permitted non-attest service under the guidance; if you prepared the application on management’s behalf, this is likely a violation; and if you signed the application or performed any other management functions, this is likewise problematic. The same concerns arise in the context of providing non-attest services for a client who is a PPP lender. CPAs can performs certain loan underwriting activities on behalf of clients without running afoul of Independence rules. If you have confirmed receipt of borrower certifications in the loan application, confirmed receipt of information provided by the borrower about employees, salaries, and payroll taxes on or around 2/15/2020, or confirmed the dollar amount of the average monthly payroll for the preceding calendar year from payroll information provided by the borrower you are in compliance as these are not management responsibilities. Independence concerns in the PPP context are rather similar to other contexts, so as long as you steer clear of management functions when offering non-attest services to attest clients and engaging in the proper analysis, you will likely avoid ethical problems. Be sure also to have a conflicts process in place as it’s likely that your clients will be seeking loans from the lender to which you are providing services. The risks and safeguards approach to resolving ethical challengers serves practitioners well here, and AICPA and the State societies have good resources in that regard. 

With respect to the PPP loan process itself, the certification is an area receiving a lot of scrutiny, and documentation on your behalf, or your client’s behalf, will be crucial in avoiding future negative outcomes. Either you or your client should have a contemporaneous documentation of loan necessity on hand to ensure that any potential review of the loans, which is certain for those who received over $2 million as mentioned in FAQ #39, will go as smoothly as possible. FAQ #31 provides additional guidance for how to asses economic need and establish eligibility. Having a writing that shows the analysis of how the current loan proceeds are necessary to support the ongoing operations of the applicant is widely regarded as a best practice. Any such writing should include information describing the uncertainty of the business’s economic outlook, the impact of the pandemic on current operations, likely business risks in the near term, any other sources of liquidity and how the business is using that capital, and how the proceeds will support continuing operations of the business particularly as the funds are used to prevent layoffs and support payroll. Remember, this is a good faith certification, and there is significant legal, and headline risk, for failing to properly certify. FAQ #46 provides guidance how SBA will review the good faith certification for those receiving loans over $2 million. We’ve seen large public companies excluded from the process, and also seen similarly situated private companies be excoriated in the press and by elected officials for taking proceeds from this program. Both clients and practitioners should be aware of this landscape, particularly as we head towards the forgiveness certifications stage of the process. 

SBA has released the application and instructions for loan forgiveness, and you are probably filling this out on your client’s behalf or providing substantial assistance to them as they do so. As you calculate the eligible payroll costs and non-payroll costs eligible for forgiveness, pay particular attention on what constitutes payroll costs during the covered period and ensure that clients are making the proper calculations and complying with the required limitations, such as salary limitations, and the single counting of payroll costs that were paid and incurred. Also, be particularly careful of employee bonus, healthcare benefits, and retirement plans in your payroll calculations. Guidance is still needed in this area. It is possible that your clients will not qualify for forgiveness. Here again, communication and documentation will be your friends. 

At the end of the day, our back to work guidance relies on a few concrete recommendations: check regulator guidance, communicate with your clients and trusted advisors both, and document the steps you are taking. This tried and true risk management guidance isn’t too different from what came before, because while none of us know what is coming tomorrow, we know what happened in the past, and people aren’t that different between then and now. Good risk management has always hued to these simple techniques and necessary documentation. It’s served us well before, and there’s every reason to think it will continue to do so. Take care of yourself, your staff and your clients, and risk management concerns might just be the greatest of your setbacks during this most challenging of times.

Bradley Pryba │ Of Counsel

White Plains
914.872.7354 │ bradley.pryba@wilsonelser.com

Brad Pryba provides legal counsel and representation to accountants and accounting firms in connection with all aspects of their businesses. In addition to professional malpractice defense and commercial disputes, Brad’s practice encompasses regulatory investigations and proceedings, risk management, ethics proceedings and transactional matters involving accounting firms.

Brad also is a seasoned government relations professional with deep legal and regulatory experience. He has advanced legislation in the New York State Legislature, handled administrative matters with various state agencies, and interacted with local elected officials and agencies on behalf of a varied roster of clients. He also has drafted policy positions on behalf of clients with respect to New York State budget and legislative processes.

In addition to his representation of national and international public accountancy firms, Brad has represented clients in technology, psychology, pharmaceuticals, health care and hospitals, consumer products, and educational and social services organizations. Prior to joining Wilson Elser, Brad worked at a national firm focused on government relations and lobbying where among his varied roster of clients he represented the Big Four accounting firms in regard to regulatory and government relations matters.

Culminating his six years with the New York State Society of Certified Public Accountants, Brad served as Chief Legal Officer and primary legal adviser to the board of directors and subcommittees. He also ran the NYSSCPA ethics program and regularly provided ethics trainings and guidance to CPAs throughout the state. In addition, Brad worked extensively with the New York State Department of Education, which licenses and regulates CPAs.

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