Ethical Clearance Letter: When and How to Request One

An ethical clearance letter asks the previous accountant whether there is a professional reason to decline a new engagement. Get the client’s written authority first, then request clearance and the records you need before starting the first job.

When You Must Seek Professional Clearance

When replacing another accountant, a member in public practice must assess reasons not to accept the engagement under APES 110 paragraph R320.4. Contacting the previous accountant is the usual practical step. CA ANZ describes the letter as best practice for non-audit work. Audit and review appointments have a specific communication requirement under R320.8.

Get permission before contacting the previous accountant about the client’s affairs. Written authority shows which entities and information the client allows you to discuss. If the client refuses, ask why and assess the effect on acceptance. Decline if you cannot address the resulting ethical threat.

Additional work also needs an acceptance assessment. A second opinion or one-off assignment might leave the existing accountant in place. Define that limited scope and assess whether contact is needed to obtain relevant facts, with the client’s permission. Avoid requesting a whole-file transfer for a narrow job.

Australian paragraph AUST 320.2.1 applies the section when the other accountant is a non-member. The APES 110 professional appointments standard explains these duties. See the APES 110 guide for its wider requirements.

A tax agent who is outside the professional bodies still has TPB obligations. The TPB Code of Professional Conduct does not prescribe an ethical clearance letter. Contact can help you act lawfully in the client’s best interests and take reasonable care when establishing their affairs.

What the Ethical Clearance Letter Asks

Ask about professional reasons for declining the appointment and the unfinished work that could affect your first job. The clearance question is separate from the request to transfer documents.

Use questions that cover these matters.

• Is there any professional reason why we must reconsider accepting this engagement?
• Identify unlodged returns or activity statements and partly completed jobs.
• Confirm who is completing each outstanding job and its deadline.
• Describe open ATO reviews, objections, payment arrangements or other matters the incoming practice must address.
• Confirm which requested records can be transferred and when.

The previous accountant needs authority to discuss the client’s affairs unless a legal duty permits disclosure. They must keep the reply factual and respect confidentiality, including information about other clients. Permission to transfer one company’s file does not authorise disclosure about every person in its group.

CA ANZ’s guidance on information requests explains the obligation to reply promptly. A reply can identify a consent restriction or give a timeframe for collecting information.

Keep unpaid fees separate. The ethical letter must not demand payment, pressure the client to stay or ask the new accountant to collect the old practice’s debt.

Ethical Clearance Letter Template

Use a brief clearance request that identifies each client and attaches their authority. This fictional example uses entity roles instead of names. Replace those roles with the legal names and identifiers of the entities you actually represent.

Subject: Professional clearance - the company and the trust

Dear previous accountant,

The company and the trust have asked the incoming practice to provide their accounting and tax services. Each entity’s signed authority is attached. It permits you to discuss these services and transfer the listed records to us.

Please tell us whether there is any professional reason why we must reconsider accepting this engagement. Please identify unfinished work, outstanding lodgments and open ATO matters, including who will complete work already underway.

We also request copies of prior-year returns, supporting schedules and the entity records listed in the attached handover request. Please identify any item you cannot release and the reason.

Please reply within five working days, or let us know when a response will be available.

Incoming practice
Contact accountant: the accountant assigned to the engagement
Reply email and telephone: the incoming practice’s contact details

Put the actual reply date in the request you send. Five working days is an example of a practice-set response period, not a prescribed clearance deadline. Use a shorter follow-up interval when an approaching lodgment needs attention.

After reviewing the clearance reply, send a separate records request if the first message has not already started the transfer.

Subject: Records transfer - the company and the trust

Thank you for your clearance response. Under the attached client authority, please transfer the agreed prior-year returns and schedules through our secure document channel.

Please also send the trust deed and variations, company register, loan agreements and relevant ATO correspondence. Identify any outstanding records and the expected transfer time.

Please confirm which work your practice will complete and which work passes to us.

Keep the message neutral. File the authority and both requests beside the reply. If clearance arrives by phone, record the caller and the substance of the discussion, then confirm any agreed handover responsibilities in writing.

Client File Transfer and Handover

Request the records that support the services you are taking over, and check each entity separately. A client handover usually needs more than a copy of the last return.

Request prior-year returns and financial statements, depreciation schedules and capital gains records. For relevant entities, add the executed trust deed and variations, company registers, loan agreements and ATO correspondence. Ask for calculations behind carried-forward balances, including tax losses, where you need them for the next return.

Document ownership depends on the engagement terms and the nature of the document. Client-supplied records generally remain theirs. The previous accountant usually keeps internal working papers. A document required as a client record or delivered as the engagement’s end product needs separate treatment. CPA Australia’s client relationship guide explains the ownership distinctions.

After the client completes any required nomination and you add the authorised link, use Online services for agents to check available ATO information. The ATO’s income-tax history instructions describe viewing lodgment status and assessment outcomes. Its communication history guidance covers available client communications.

These checks reduce reliance on the previous accountant for ATO status information. They do not reconstruct deeds, cost-base evidence or internal depreciation calculations. Request those from the client or previous accountant. Follow the agent nomination steps separately from clearance.

Use a handover log such as this fictional example. Record receipt dates in the live file.

Entity	Record	Status	Next action
Company	Prior-year return	Received	Reconcile opening tax balances
Company	Depreciation schedule	Missing	Request from previous accountant
Trust	Deed and variations	Partly received	Obtain all executed variations
Trust	ATO correspondence	Received	Identify open matters

Check that records belong to the correct entity and year before marking them received. The outgoing practice’s termination steps explain the other side of the change.

Records to Hand Over When Fees Are Unpaid

Unpaid fees do not create an automatic right to hold every client record. A lien is a legal right to retain another person’s property as security for an obligation. Get legal advice about a specific dispute.

The TPB’s guidance on claiming a lien distinguishes a particular lien from a general lien. Tax practitioners usually rely on a particular lien. The debt must relate to the property retained, which the practitioner lawfully possesses. It can cover a prepared return or an electronic file improved through the practitioner’s work.

Source invoices or journals supplied only for checking generally fall outside that lien. A debt owed by one entity also needs separate treatment from another entity’s property. CA ANZ’s client handover guidance says statutory company registers and minute books belong to the client and cannot be held under a lien.

The TPB recognises valid liens and recommends legal advice on whether one exists. Its Code also requires lawful conduct in the client’s best interests. Wrongfully withholding records needed for a lodgment can harm those interests and raise a Code issue. A fee dispute alone proves neither a valid lien nor a breach.

Ask the previous accountant to identify the documents retained and the claimed legal basis. Have the client settle or dispute fees directly. Obtain available ATO information and copies held by the client while the dispute continues.

When a deadline is at risk, record what is missing and how that limits your work. Explain the risk to the client and consider an appropriate deferral request. Do not lodge an unsupported return simply to meet the deadline.

When the Previous Accountant Does Not Reply

Follow up when your requested reply date passes, then assess whether you can proceed with enough reliable information. There is no universal waiting period that turns silence into clearance.

CA ANZ expects professional correspondence to receive a prompt response. Silence cannot give the previous accountant a veto over the client’s decision to change accountants. It also gives you no assurance that the engagement is free of problems.

Take the following steps before proceeding without a reply.

1. Confirm the contact details and resend the authority if the first request did not reach the previous accountant.
2. Log each attempted contact and any explanation received.
3. Obtain the client’s own records and available ATO information.
4. Assess the missing information and document your acceptance decision. APES 110 R320.6 requires other reasonable steps when communication is unavailable.
5. Limit or decline work that you cannot perform competently with the information available. Tell the client which records or decisions are needed next.

For an escalated clearance dispute, CA ANZ members can contact the Professional Standards team. CPA Australia has a specialist team for professional and ethical queries. IPA members can use Professional Assist. Seek legal advice when ownership or a claimed lien remains disputed.

Where Clearance Sits in Onboarding

Start the clearance request when the client accepts your proposal, and complete the acceptance assessment before beginning the first job. Treat proposal acceptance as conditional where professional clearance is still outstanding.

Place the request beside the engagement letter and identity checks in your accounting client onboarding checklist. ATO nomination establishes the authorised agent relationship. It does not answer whether a professional reason exists to decline the engagement.

Your onboarding form can ask for the previous accountant’s name, practice and contact details. Collect authority to contact them and to receive records for each entity. Confirm that the person giving authority can act for that entity before sending the request.

Tax Genie lets staff request professional clearance through a secure link and track the outcome for each entity. Use the recorded reply to make your acceptance decision, then check the handover log. Before starting the first job, confirm its owner, the records received and how you will address anything still missing.