This helpsheet has been issued by ICAEW’s Technical Advisory Service and explores some of the issues and considerations in the event that a client is unable to pay a firm’s fees.

Members may also wish to refer to the following related helpsheets:

• Exercising liens
• Withholding signature or service

It is largely a matter for professional judgment whether to continue to act for a client unable to pay fees or nearing insolvency. Members are free to choose which clients they act for and are not obliged to continue to act contrary to their own interests in these or similar circumstances. Whatever decision is made, a firm should document the decision and the reasons behind it.

Threats to objectivity

Firms should consider whether the non-payment of fees give rise to an actual or perceived self-interest threat as highlighted in the ICAEW Code of Ethics paragraph 330.11 A1.

Where the engagement is an audit and the amount outstanding is not trivial the audit engagement partner will need to consider, in accordance with the FRC Ethical Standard paragraph 4.29 (2016) or 4.11 (2019) whether the audit firm can continue as auditor or should resign. Where fees are unpaid for a long time and, in particular where a significant part is not paid before the auditor’s report is due to be issued, a self-review threat is created. This could be because the issue of an unqualified report may enhance the audit firm’s prospects of getting paid (paragraph 4.30).

Disengaging

If a firm did decide to step down then it should ensure that the client is not unduly disadvantaged e.g. by resigning just before a deadline. It would therefore be preferable to give notice of the intention to resign and not to do so at a critical stage of the client’s affairs.

Where a firm does step down then it will need to comply with section 320 of the ICAEW Code of Ethics in relation to change in professional appointment and liaising with the successor. (further guidance is available in the helpsheet Change of professional appointment – Outgoing accountant).

Continuing to act

If a firm continues to act for the client in the hope that they will be able to resolve their difficulties and their financial position will improve then the firm should be aware that if the client does become insolvent, it may join the ranks of the unsecured creditors.

Withholding signature or service

It is generally not appropriate to withhold signature or service purely to improve your bargaining position in relation to fees. Further guidance can be found in the Withholding signature or service helpsheet.

There are also some steps that firms can take to avoid this situation arising for example by setting up standing order arrangements for fees to be paid in installments or asking for fees to be paid in advance. Don’t forget that such arrangements may create a preference that could cause problems should the client become insolvent.

Firms should adhere to the guidance in the Fee information helpsheet.

There are also some steps that firms can take to avoid this situation arising for example by setting up standing order arrangements for fees to be paid in installments or asking for fees to be paid in advance. Don’t forget that such arrangements may create a preference that could cause problems should the client become insolvent.

Firms should adhere to the guidance in the Fee information helpsheet.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Ethics Advisory Service on +44 (0)1908 248 250 or via webchat.