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Discussion:Retaining Clients records

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MAPBUSINESS (talk|edits) said:

17 February 2006
California practitioner.Couple of years ago prepared taxes for client from backup copy (Qb) provided by client and more material provided by client. Returned "everything" to client, kept Quickbooks file with a lot of work done by us to adjust wrong entries. Client never paid. Now wants copy of Qbs file, has an audit. Do we need to return our services? Client has evertything he provided to us, but our work. Went through Circular 230...too gray

Warren (talk|edits) said:

17 February 2006
I'm also a California practitioner and I don't know the law on this topic but I'd sure try not to be helpful in this situation. Are you a "paid" preparer if you never get paid?

If you're not helpful and the client ends up owing a bunch of tax are you going to get sued? What is the probability that there will be tax due? I can tell you that in California the practitioner is fighting an uphill battle in any lawsuit situation. So before I refused to give the work to them I would make sure of my legal position.

Riley2 (talk|edits) said:

17 February 2006
I remember researching this issue a while back. I believe that if you are a California CPA or California attorney, you can lose your California license for retaining a general ledger.

I believe that the California and National EA Associations have their own positions on this issue (not necessarily consistent with one another).

Warren (talk|edits) said:

17 February 2006
There are strict rules in California about retaining client records. There is no question that you must return everything that the client gave you whether they paid for your services or not. But these people never paid a nickel and they have been given everything that they brought in.

I would probably just give them the stuff if I thought that there was any chance that they would sue. I was sued once over a financial statement. A partner was in dispute with his partners and he sued me and the company's attorney along with his partners. He ended up dropping it a year later but what a pain it was. I'd do almost anything to avoid it.

Riley2 (talk|edits) said:

17 February 2006
Under California State Board of Accountancy regulations, it is legal for the CPA to retain “working papers”. However, if the working papers are really part of the client’s general ledger, then retention is illegal.

Quoting from Regulation 68, “[a]lthough, in general the accountant's working papers are the property of the licensee, if such working papers include records which would ordinarily constitute part of the client's books and records and are not otherwise available to the client, then the information on those working papers must be treated the same as if it were part of the client's books and records.”

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