Trust and Integrity

Trust and integrity are foundational elements for any successful vendor-client relationship, especially when it comes to managing your company's financial affairs, and extra especially when it comes to relationships that have the potential to break your business if they go wrong. One such relationship is the one you have with your company accountants. So what do you do when they go rogue on you?

Similar to the shady practices of some auto mechanics or computer repair technicians who create problems to ensure repeat business, the accounting industry is not immune to unethical practices. Rogue accountants who purposefully delay action on your company accounts to incur additional fees are regrettably more common than many would like to believe, and it is often not the smaller firms you need to be wary of.

Recognising the Signs of Unethical Accounting Practices

Delayed Actions and Artificial Complications

The hallmark of a rogue accountant is their tendency to unnecessarily delay actions on your company accounts. This tactic is akin to a mechanic who fixes your car but intentionally leaves a small issue unresolved, ensuring that you'll be back in their shop in a few months. In the accounting context, this might manifest as procrastination in completing financial statements, responding to tax inquiries, or addressing regulatory compliance issues. The underlying motive is to create a situation where the client becomes dependent on their services, often at the eleventh hour, leading to increased and sometimes exorbitant fees. It is commercial exploitation pure and simple.

Obscuring Information and Lack of Transparency

Transparency is key in any professional relationship, and this is particularly true in accounting. Rogue accountants might purposefully obscure financial information or present it in an overly complex manner. This tactic ensures that clients feel overwhelmed and incapable of managing their accounts without professional help. Sure there are things you just don’t want to be doing yourself (as a company) or hiring in-house staff to have to do, but there is a lot of stuff that can be taken in-house effectively and managed, provided you are taught how (to fish). It's similar to a computer technician who uses complex jargon to intimidate a client into thinking their computer issues are more severe than they are. In this way your brain doesn’t have a chance to catch up and ask questions that would lead to realising the lack of complexity that actually exists and the outcome is it all leads to unnecessary and/or repeated service calls.

Sudden Fee Increases and Inexplicable Charges

Another red flag is sudden and inexplicable increases in accounting fees or the addition of unexpected charges; invoices from third party professionals hired in by the accountant to assist with something and an invoice magically appears. These are like the worst kind of salespeople who provide a low initial estimate for and then significantly increase the price after commencement of the engagement citing unforeseen complications; you know the type, because you see the outcomes in public funded infrastructure projects all of the time. Watch out for it in your own business though as well. In accounting, this could involve charging for services that were initially included in the standard fee or billing for extensive 'additional work' that the accountant claims was necessary to resolve unforeseen issues.

Strategies to Protect Your Business from Unethical Accounting Practices

Conduct Thorough Background Checks

The first step in avoiding rogue accountants is to conduct thorough background checks before hiring. This process should include verifying qualifications, checking references, and reviewing their track record with previous clients. Don’t hesitate to ask for testimonials or case studies that demonstrate their expertise and ethical practices. Do this also (especially) for the bigger (even the biggest) accounting firms. Ask the questions, get the answers, then question the answers.

Establish Clear Communication and Expectations

Establishing clear communication channels and setting expectations at the outset of your relationship with an accountant is crucial. This includes a detailed discussion about the scope of work, timelines, and a transparent fee structure. Ensure that all agreements are documented in writing to avoid any ambiguity later on. Documentation is often a step that is overlooked in the euphoria of finding help that you believe will do the job and going through a discovery session and preliminary quasi on-boarding process. The exception here is possibly when the accountant sends through their ‘standard fee agreement’ as they usually do. Reject it and draft something together that encompasses your agreements with them and that works for you. If you want to be a standard number in a standard framework you can get that anywhere. Also, despite much industry regulation, these standard agreements are always filled with small nuances that will work against you and that you will not necessarily pick up on without legal advice.

Regularly Review and Monitor Account Activities

Stay actively involved in your company’s financial affairs. Regularly review account statements, and don’t shy away from asking questions about any entries or actions that seem unclear or unnecessary. An ethical accountant will always be willing to explain and provide detailed information.

Seek Second Opinions

If you suspect that your accountant is engaging in unethical practices, don't hesitate to seek a second opinion from another professional. This step is crucial in identifying whether the actions taken by your accountant are genuinely necessary or if they are artificially creating issues to generate additional fees.

Takeaway

Just like with any industry, the accounting sector has its share of professionals who may not always have your best interests at heart. Being aware of the signs of unethical practices, like unnecessary delays in action, lack of transparency, and inexplicable fee increases, is crucial. Protecting your business involves conducting diligent background checks, setting clear expectations, staying involved in your financial affairs, and seeking second opinions when necessary. Remember, a trustworthy and transparent accounting partnership is not only valuable but essential for the financial health and success of your business.