Is it risky to buy an accounting practice whose workpaper files are all on paper?

Begin with what you can see. Ask to look at a sample of files from different years and different client types. Are they complete, labelled consistently and easy to follow, or does only the seller know where things are? A messy system means more hidden risk, because you cannot tell what is missing.

Then think about the practical side. Where are the files stored, who has keys, and what protects them from fire, water or theft? Ask how long the seller keeps old files, how they are destroyed, and whether any retention commitments to clients or a professional body apply. Your lawyer and your professional body can tell you what you must keep.

Finally, price in the change. Moving to digital files means scanning, sorting and retraining staff, and the work will fall on you. Ask the seller how clients feel about the current process and what tools staff rely on. If the practice runs on habits rather than systems, plan for that cost in how you assess the whole purchase. Ask also whether any clients have asked for electronic copies and how the seller responded, since that hints at how much pressure there is to change.

Key takeaways

• Inspect a real sample of files across years before you accept the seller’s description.
• Ask how files are stored, secured, retained and destroyed.
• Plan the time and effort of going digital as part of your buying costs.