Be Prepared: The Importance of Practice Continuation Planning for CPAs

Note that this article should be considered non-authoritative guidance only.

With clients reliant on the work of CPAs, particularly CPAs working in small, medium and sole practitioner firms, practice continuation plans are both a business necessity and a regulatory obligation. Succession planning, contingency planning and preparations for retirement are crucial to ensure a smooth transition of leadership and mitigate significant business disruptions and harm to clients.

Firms are expected to develop policies and procedures to manage impacts to clients, and operations in the event of emergency, death, incapacitation, or prolonged absence of key individuals. Part of this planning must include notifying CPA Ontario as the regulator of the profession when such events occur and ensuring reporting obligations continue to be met.

Here are some key areas for members and firms to consider when creating a Practice Continuation Plan.

Key Personnel

Identifying essential personnel and their responsibilities, especially those with client-facing roles or who manage significant client relationships is the first step to creating a knowledge and responsibility transfer plan that allows others to assume these roles, if needed. Additionally, designating an individual or individuals who will be responsible for executing the plan in the event of an emergency will help to ensure quick action in a crisis.

Succession

Putting a succession plan in place for transition of leadership and ownership will ensure continuity for your firm and for your clients. This should include timelines, roles, and responsibilities and any training needed for personnel to assume these roles or responsibilities.  For smaller firms or sole practitioners, this may mean identifying potential candidates from outside an organization, or partnering with another firm that could step in temporarily in the event of an emergency.

Contingency

The Practice Continuation Plan should include a contingency plan for unexpected events, including procedures to follow in the event of disruptions to day-to-day operations such as sudden illness, incapacity of key personnel or a natural disaster. This planning should consider backup and recovery procedures, including access to files and technology planning, to protect client information, key contacts and engagement requirements to prevent disruption.

Retirement

Your general retirement plan should also be included with any details for executing any of the following scenarios:

• The transfer or sale of the firm to a family member that holds a CPA designation in Ontario.
• The sale of the firm to a business partner or employee.
• The sale of the firm or shares to a third party.
• Wind-up procedures for the firm if no sale or transfer is expected.

Upon retirement, if you continue to provide services that qualify as providing accounting services to the public, you would need to maintain your firm registration with CPA Ontario.

It is also important to consider that, even as a retired member, if you maintain a registered firm, there are no exemptions from Firm Obligations.  You will continue to be subject to annual reporting of professional liability insurance, continuing professional development obligations, annual practitioner dues, practice profile questionnaire, practice inspection and notifying CPA Ontario of any changes to the firm.

However, you may be eligible for a retirement waiver for your annual membership dues as a member with CPA Ontario. Please visit CPA Ontario website for more information.

If you decide to close your firm and surrender your firm registration, discovery insurance must be in place.

Continuation planning should be iterative, reviewed and updated regularly to reflect changes in the firm, personnel, technology, and clients. By proactively addressing continuity, firms can ensure they are prepared for unexpected events and that their organizations and clients are protected.