The CPA's client received funds from the Paycheck Protection Program ("PPP") under the Coronavirus Aid, Relief, and Economic Security ("CARES") Act and is asking if and how they will qualify for PPP loan forgiveness. As of this date, there is uncertainty over some of the program details and businesses worry about meeting and maximizing the loan forgiveness requirements. With the uncertainty surrounding the loan forgiveness process how can CPA's protect themselves from liability while assisting clients seeking loan forgiveness?
The best protection tool in a CPA's arsenal is the Engagement Letter. An engagement assisting clients seeking loan forgiveness under the PPP is considered a consulting engagement in accordance with the Statement on Standards tor Consulting Services issued by the American Institute of Certified Public Accountants ("AICPA"). Like any engagement letter, the PPP loan forgiveness engagement letter should spell out the nature and scope of work to be performed, the CPA firm's responsibilities, the client's responsibilities and the work product to be delivered to the client. The Engagement Letter should also contain limitation of liability and indemnification clauses.
In drafting the engagement letter, the following considerations should be taken into account:
We also recommend stating the CPA is not involved with and has no influence upon the loan forgiveness process and cannot guarantee the Application will be approved. It is important tor the client to accept responsibility for the accuracy and completeness of all certifications included in the Application and maintain all required documentation to support the application.
While clients may be anxious to apply tor forgiveness keep in mind the following factors:
While it can be difficult for a client to be patient with the ongoing uncertainty prevented by COVID-19, as their trusted advisor, a CPA can help calm the fears while awaiting proper guidance from the PPP.
Even apart from Coronavirus issues, CPAs should periodically review and update their engagement letters. Stay tuned for our upcoming Webinar on Engagement Letters.
If you have questions or would like more information, please contact Nancy Reimer at nreimer@fmglaw.com or Elizabeth Lowery at elowery@fmglaw.com.
Nancy Reimer is a Partner in Freeman Mathis & Gary's Boston office. She is Vice Chair of the Firm's Professional Liability/Errors & Omissions, and Chair of Accountants Liability National Practice Team.
Ms. Reimer devotes the majority of her practice to the defense of professional malpractice claims against accountants, attorneys, financial advisors, securities brokers and other professionals, as well as breach of fiduciary duty claims and claims against directors and officers of corporations. She also counsels clients in prevention techniques for avoiding litigation and other risk exposures.
Elizabeth Lowery is a Partner in Freeman Mathis & Gary's Hermosa Beach and downtown Los Angeles offices. She is a trial lawyer with a nationwide practice focusing on financial institutions and professionals. As a former trader and CPA, she brings a unique and exceptionally strong financial background to an array of commercial litigation.
Ms. Lowery has extensive experience in all aspects of financial and investment services including internal investigations, SEC and FINRA investigations and litigation, regulatory licensing, expungement, fraud claims, breach of fiduciary duty, unfair business practices and professional negligence.
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