Kendrick wrote:Well guess what, the potential client told the CPA firm no thanks, unless they remove that provision.
The CPA firm agreed to the change.
As well they should have. Ethically, one should take responsibility for ALL one's liabilities, with no limit.
Tax_Writer wrote:I understand why some tax preparers would want to add something like this to their engagement letters. Sometimes It only takes one crazy client to make you skittish forever.
A crazy client is not going to be dissuaded much by the fine print in an engagement letter, thus there is no "protection" there anyway. The crazy client is going to make a stink and sue anyway, but the judge will easily see that the preparer did good work with due diligence and a high standard of professionalism. And if the preparer did sloppy work and caused a problem, then he should be found liable and any fine print in the engagement letter should be ignored.
The best protection is to do good work with no mistakes that create liabilities. And when entering a gray area of interpretation, to communicate with the client that under audit IRS may interpret differently.