Engagement Letter Signed - Can an accountant come back later and double the price?

A client gives all material to an accountant to do a tax return for one of the client's structures. The accountant checks all the material given (I presume) before giving a quote on an Engagement Letter for the tax return, which the client agrees and signs. Many months later after the client not having the work started on follows up via email with the accountant a few times. Then recently the client gets an email from the accountant saying the client's structure has "too many transactions and also too many bank transactions." The accountant also says the previous year's Financial Statement and Tax Return was underquoted because the staff working on it didn't bring it to their attention, but they will let that year slide and not charge extra for that.

The accountant says "in order to complete your 2018 Financial Statement and tax return, we wish the amend the quote and increase it to......... Please let us know if this is alright for you or if you would like to discuss further". Basically the new price is double what was signed in the Engagement Letter!!

Is this even legal to do? The accountant gave an Engagement Letter after they got all the material. The Engagement Letter was agreed and signed on. Now they want to increase the price. And they are doing it right now a few weeks before the deadline! The Engagement Letter said "approximately four to five weeks from receipt of this signed letter to complete the scope of services" but nothing was started on or talked about until nearly 3 months later, being right now is the 1st communication by them for this structure's 2018 tax return.

 

Most likely yes. However you dont have to accept the extra cost and can seek another accountant or tax agent. . Surely a phone call and a letter several weeks ago may have been prudent ? If I pick up a clients work and its in a bad state I will let them know asap what THEY can do to assist. But that doesnt mean I pick all jobs up on day two and do that either. Sometimes I'm led to beleive everything is ready and it then isnt. eg a broker report may be truly appalling and lack information. I may need 8-15 ETF annual tax statements. I have to give them that chance. If they dont or wont I will then requote it. But I dont start as its a waste of time to start / stop.

Have they explained what the key issues are. Thats the fundamental issue after all.

Transactions themselves shouldnt dictate price. Its how the information is summarised or organised. That said if its a complete mess then sure volume can add extra work, extra costs. But there can be easy ways to address that sometimes.

 

I emailed them a couple of times over the past few weeks following up, didn't get a reply until today.

The issue seems to be "we went through your ......... 2018 tax record and found your ........ has up to XXX buy/sell share trading transactions and many bank transactions". Then they basically said unfortunately the 2018 Engagement Letter sent is impossible for them to process high volume of transactions.

Share trading is all that structure did. Everything else like bank interest, expenses, etc. were all laid out with all the figures in a spreadsheet. The broker EOFY data was exported from OpenMarkets, which I believe is decent with all the required info. They had no problems with it in the past years.

 

Why do they need to process them? Don't you just provide a summary?

 

I export all the EOFY reports that the broker (Openmarkets) provides, in both CSV & PDF formats so they can choose what they will use. Total trading transactions are around 400 or so. This is what I supply to the accountant. In addition to this I provide a spreadsheet summarising other things like bank interest and expenses, which only consists of very few things. I don't know what they need to process from the EOFY broker reports provided.

 

The engagement letters typically allow the accountant to re-quote the work. However they cannot charge you for work done if you choose to walk away.

If you choose to go to somebody else and you incur penalties you can go back to the old accountant with damages for poor service.

 

Only four values are required for share trading activities.

They would have opening stock.
Then just sales, purchases are both at cost.
the final one is closing stock and if its a profit then cost may be one option, or market value esp if its a loss

Not that hard. There could be 50million transactions and the issue only needs these 4 numbers

I have a couple of clients into high volume trading (milliseconds) and they make a bit of money from high frequency trading. The same rules apply. I dont care if the excel file is 400 rows or 4million. Its same maths. It takes me 15 mins to do he business schedule.

 

Ok thanks for all who commented, greatly appreciated

 

Is there any extra time or costs involved for an accountant to input the buy-sell share transactions & all the bank transactions into the BGL360 software to satisfy a SMSF Auditor or is it just copying & pasting the data from the Exel spreadsheet? Should it still take about 15 mins or so? They are saying many, many hours. They have said saying:

"We are required to input individual bank transactions & ensure all the bank transactions are explainable in detail. All bank balances & investment portfolio must match against third parties record. We are required to record all individual super contribution transaction into right member accounts and confirm with external record. Ensure all the pension payment to pay within the min and max pension. Expenses payment are recorded with support papers.

Most non-share trading SMSF will take 10 hours to complete the job but because your SMSF involve in share trading, it will take longer. I estimate the time it will take will be between 25 to 35 hours. In addition, we require to pay $230pa to the software company for each super fund."

When I take a look at BGL360's website myself, I don't see there's a mention of a charge of $230pa for each SMSF used by the accountant: https://clients.bgl corp.com.au/newpurchases?p=sf360

 

In a SMSF that method doesnt work.

If the excel data was entered as totals the auditor may be reasonable satisfied. I would adopt that view IF no pensions are being paid or material issues arise with how BGL allocated earnings based on a avg daily weighted sum. If assets are segregated it may be a problem.

In any event if it was needed I could import the excel into BGL using the bank feeds - manual process. Allocate every buy and sell to the same asset !! and merely allocate assets held at June 30 to the final actual investments (Tip - Its a shortcut)

One of the key things an adviser should be doing is consider what is the most cost effective way to address compliance. Entering every single Commsec trade on the bank statements (after all its just cash) may be a futile exercise. For Commsec clients I call Commsec and they can run a special data feed which synthesises the trading account. Treat it like a bank account and it then picks up the trades in that account. Makes my life easy and keeps cost way way way down. Its just tends to bugger up if you have two holdings of any shares eg inside Commsec and outside. It confuses each HIN and all sales must be deleted to fix it.

I have some VERY large funds. 35 hours...Wow. Havent seen that in a while.

Yes the firm pays a license fee per fund. Its nothing like $230 however. We pay under $100 + little extra for data feeds