Want to build a high-quality tax practice? Read this first

Professional development is important, as is encouraging learning through informal on-the-job discussions (Getty Images/VioletaStoimenova)

Any practitioner who performs tax services knows how inherently complex and challenging the area can be. “Since the rules are constantly changing, this kind of work is risky by nature,” says FCPA Bruce Ball, vice-president of taxation at CPA Canada.

According to Ball, tax work is the largest source of professional liability insurance claims for small to mid-sized practices (SMPs). To help them put the right processes in place to maintain a high-quality tax practice, CPA Canada developed a self-assessment tool, Characteristics of a high quality tax practice, SMPs can use to identify gaps in their systems and take steps to fix them.

“Going through the questionnaire can ultimately help firms avoid costly errors, mitigate potential risk and increase efficiency and long-term profitability,” says Fabio Bonanno, principal, taxation, at CPA Canada.

Here are some highlights from the checklist.

1. PRIORITIZE EDUCATION NEEDS

With tax rules constantly changing, it’s important for practitioners to ensure their knowledge is up to date, relevant and appropriate for the work. “This requires professional learning and development,” says Ball. “It also requires learning through more informal avenues, such as on-the-job discussions with other tax colleagues.”

Ball adds that practitioners must also be able to determine when it makes sense to engage expert advice. “Engaging in work that is outside of the practitioner’s expertise for a small number of clients versus engaging subject matter experts is not only inefficient, but it also increases the risk of errors and omissions,” he says.

2. BUILD STRONG SYSTEMS

Strong systems are essential to identifying and mitigating areas of tax risk, says Ball. “A strong system check encompasses policies and processes for client acceptance, the review of all tax work, and the tracking and management of files and deadlines, as well as issues around cybersecurity and privacy.”

Ball cautions, however, that best practices will only succeed if they are closely followed. “Practitioners should also develop follow-up systems and other tools for performing and monitoring these processes,” he says.

3. APPLY RIGOUR TO COMMUNICATIONS AND DOCUMENTATION

It’s imperative to maintain records of the work performed on an engagement and all related communications and documentation with internal colleagues, clients, the Canada Revenue Agency, or others. The practice should also have guidelines on how to document communications and work performed during an engagement. 

“Developing clear directions on what is expected for each file will help create consistency across all your firm’s work and ensure you have the right records in place if a dispute arises later,” says Ball.

Proper documentation is one of many indicators that a practice is managed properly and shows the quality of the work you are doing, adds Bonanno. “If you are not demonstrating that at first glance, others will question the quality of the work you are producing.”

4. ESTABLISH A SUSTAINABLE PROCESS

Ball advises assigning a leader to be responsible for ensuring a firm follows the policies it has set for itself. “I advise reviewing the policies once a year as people may take shortcuts over time.”

It can also help to meet with other practitioners, he adds. “Hear what others are doing in their practice. Find out what worked and what didn’t. There might be some valuable ideas there.”

Also, don’t necessarily try to do everything at once. “It may be easier and more efficient to take a step-by-step approach to introducing improvements,” says Ball.

The questionnaire can play an invaluable role in the process of building and maintaining a quality tax practice, adds Bonanno. “It provides a clear view of what practitioners need to do to start the process. This will then allow them to prioritize needs, and take action using available information resources, including CPA Canada blogs and webinars.”

“The important part to understand is that the questionnaire is a way to improve what you have and your position, whether that means getting a better selling price for your practice, or becoming more efficient and profitable on an ongoing basis,” says Ball.

STAY UPDATED

The best practices checklist is part of an ongoing collection of proactive resources for practice management, advisory, compilations and tax guide (PACT). Developed for sole practitioners and SMPs, PACT provides guidance, checklists, templates, case studies, sample forms, and links for practitioners in various areas including tax.