Act No. 513/1991 Coll., the Commercial Code (hereinafter the “Commercial Code”), requires business entities to maintain accounting records to the extent and in the manner prescribed by a special law (Section 35 of the Commercial Code). The special law governing the scope and manner of keeping accounts is Act No. 431/2002 Coll. on Accounting (hereinafter the “Accounting Act”). Entrepreneurs as well as other accounting entities have the option to choose whether to have their accounting managed internally—by an accountant who is their employee—or externally—by another legal entity or natural person who performs this activity as a business based on the free trade “accounting services.”
What risks may arise when issuing documents if the accounting is handled by an employee of the entity?
If an accounting entity has its own employees handle the bookkeeping, it generally has access to the necessary information and documents at any time, can better monitor the performance of bookkeeping duties, and there is also a lower likelihood of information leaks regarding its business operations. As is inherent in the nature of employment, an in-house accountant (employee) maintains their employer’s accounting records on the employer’s behalf, following the employer’s instructions and using work tools owned by the employer. This applies equally to accounting software and all databases and data, including their outputs, which are created during the course of bookkeeping and are the property of the employer. Problematic situations arise only rarely in connection with the handover of accounting documents by an internal accountant, and even if a situation were to arise in which an internal accountant fails to hand over accounting documentation or part thereof to the employer, they commit a clear breach of duty, with potential liability not only under labor law but such conduct may even cross the boundaries of criminal law.
What if I entrust bookkeeping to an external party?
If an entrepreneur opts for the second method of bookkeeping—i.e., outsourcing—they should first and foremost formalize their relationship with the accounting firm in a contract that establishes the framework for their entire future relationship, cooperation, and mutual rights and obligations. An accounting contract is not required by law to be in writing; however, since the accounting entity itself is always responsible for its accounting and does not relinquish this responsibility by delegating it to another legal or natural person, it is advisable to enter into a written contract in the case of outsourced accounting. By thoroughly defining the mutual rights and obligations in the contract, the accounting entity can avoid various disputes. However, it should not be forgotten that if the accounting services contract is not concluded in writing, the mutual relationship will be governed solely by law, and it is precisely here that disputes often arise in practice regarding the extent to which a party to the legal relationship is, or is not, obligated to perform certain actions, and thus for which obligations they are, or are not, liable. The main reason is that an accounting contract is not defined as a separate type of contract in the law, and given the actual scope of activities that typically fall under accounting services or may be related to them, it may be problematic in practice to determine which legal norms and provisions of the law should govern specific obligations. The accounting service includes activities that can be defined as the performance of a work (e.g., preparation of financial statements, tax returns, posting of accounting documents, preparation of accounting books, etc.), in another part as an agency relationship (e.g., when filing tax returns, notifications, or reports on behalf of the client as an employer), and in yet another part, for example, as a custody agreement (e.g., when storing the client’s accounting records and other documents at the accountant’s premises).
Therefore, if the client does not have a written contract with the accountant, in the event of a disagreement or conflict, a situation often arises in practice where the parties do not know what they can or cannot legitimately claim from the other party.
How can a written accounting contract help resolve a situation where accounting documents are not provided?
We consider it essential to point out that it is not enough to have “any” accounting contract in place; rather, the contract should be well-drafted, particularly with regard to a sufficiently precise and clear definition of the subject matter of performance—i.e., what the accountant is required to do for the client, or what the accountant is no longer required to do—and also in terms of defining other mutual rights and obligations. the accountant is or is not actually obligated to perform for the client, and also in terms of defining other mutual rights and obligations, with a focus here on detailed provisions for those aspects of the cooperation between the parties where disputes and disagreements most frequently arise, or where the parties to the relationship most often “fall short” in practice. One such area is certainly the settlement of matters upon termination of the cooperation, which includes the handover of accounting records, or accounting and other documents pertaining to the client and held by the accountant. If the parties precisely define in the contract the procedure and mutual rights and obligations they will follow when returning accounting and other documents to the client, then it will always be clear between them what they can mutually claim from one another.
How to draft a high-quality accounting services contract?
An accounting services contract may be concluded either as an innominate (unnamed) contract—that is, a type of contract not expressly regulated by law—or as one of the contractual types specified in the law, or a combination thereof. The types of contracts that entrepreneurs often enter into with external accountants in practice include, for example, a contract for work or a mandate contract. Which contract type is most suitable depends on defining the actual scope of the accountant’s services for the client. The recommended solution is certainly an innominate contract designated, for example, as an “Accounting Services Agreement,” concluded pursuant to Section 269(2) of the Commercial Code, which will consistently, clearly, and definitively define the mutual rights and obligations of the parties.
The subject matter of the accounting services agreement—i.e., the definition of the activities constituting accounting services—can be defined both positively and negatively; meaning that the contracting parties specifically define which activities, and if applicable in what form or manner, the accountant is to perform, and which, conversely, are not, i.e., are not the subject of the contract and their performance cannot be claimed by the client.
The article on the non-issuance of accounting documents is published in full in the Administrative Accountant’s Diary for 2024.
