These questions and answers regarding the Institute’s Limitation of Liability Scheme/s are a general guide only and are based on the Professional Standards Council (PSC) Policy Statement on Disclosure of Limited Liability. They are not intended as professional advice, and you should rely on your own inquiries and assessment and other suitably qualified and specific professional advice.
The Institute expressly disclaims all liability for any loss or damage arising from reliance upon any information in these questions and answers.
What must I do to disclose the limitation of liability to clients?
Regulations under the Professional Standards Legislation (PSL) require that all business stationery carries the following disclosure:
- Liability limited by a scheme approved under Professional Standards Legislation
- Where the same business stationery is used by a participating member and an Australian Financial Services licensee, the Institute recommends the following wording:
Liability limited by a scheme approved under Professional Standards Legislation*
*other than for the acts or omissions of financial services licensees.
Many practices have opted to print the disclosure statement as a footnote on all business stationery. Other alternatives are also acceptable under the regulations, such as adding the wording using word processing, a stamp or a sticker. These alternatives may be required where documents are produced using computer software and the disclosure cannot be included on the document because of software limitations.
Do I have to include the Cover of Excellence logo on my letterhead
The use of the Cover of Excellence logo is optional. It is only the above disclosure that is required to satisfy the PSL.
What is considered to be business stationery?
The PSC provides guidance in relation to the presentation of the disclosure statement. Business cards are specifically excluded. The PSC suggests that as a minimum, the disclosure should appear on:
- letterhead, and letters signed etc by the practice or on its behalf
- fax cover sheets
- documents such as written advice, with compliments slips and other documents produced by the practitioner for clients where those documents are not accompanied by a letter or other document on which appears a disclosure statement when given to a client
- newsletters and other publications
- official correspondence ordinarily used by the person in the performance of the person's occupation.
- letters signed by the practice or on its behalf
- memorandum of fees and invoices not accompanied by a letter or other document on which appears a disclosure statement when given to a client
- email, particularly where the transmission may be interpreted as an official document
- websites via which services are delivered to clients (by e commerce) or which are used to promote or advertise the services of the firm.
Does the disclosure of my limitation of liability need to be on all documents I produce?
Members in Victoria, Queensland and the Northern Territory must bear in mind the consequences of not including the disclosure statement on stationery.
The PSC is not empowered to assist in determining exactly which documents need to be included in the disclosure statement.
The PSC has advised, however, that the important test is that you must provide adequate disclosure of the fact of your liability status to clients and prospective clients. A subjective assessment has to be made as to what constitutes adequate disclosure and what materials constitute documents used in the promotion or advertising of your profession.
It is not envisaged, however, that the disclosure be printed on every page of output that you produce.
As a minimum, the disclosure should appear on:
- letterhead and letters signed etc by the practice or on its behalf
- fax cover sheets
- documents such as written advice, with compliments slips and other documents produced by the practitioner for clients where those documents are not accompanied by a letter or other document on which appears a disclosure statement when given to a client
- newsletters and other publications
- official correspondence ordinarily used by the person in the performance of the person's occupation
- letters signed etc by the practice or on its behalf
- memorandum of fees and invoices not accompanied by a letter or other document on which appears a disclosure statement when given to a client
- email, particularly where the transmission may be interpreted as an official document
- websites via which services are delivered to clients (by e-commerce) or which are used to promote or advertise the services of the firm. In South Australia, any website that is maintained by, or on behalf of, the person to promote the person’s business must also carry such a statement.
Do I need to have the disclosure on audit opinions, financial statements and compilation reports?
If an audit opinion, set of financial statements or compilation report is provided to a client under the cover of letterhead or a ‘with compliments’ slip which carries the disclosure statement, there is no need for the disclosure to appear on the attached document. However, if the disclosure statement will not be provided by a covering communication then the disclosure statement should appear on the audit opinion or accompanying report.
Do I need to have the disclosure on every page of my communication with clients?
The disclosure statement does not have to appear on every page of a communication with clients.
What are the consequences of non-disclosure?
In Victoria, Queensland and the Northern Territory failure to make this disclosure will result in the scheme not operating to limit liability.
Under PSL in other states, failure to provide the disclosure of the member's limitation of liability under the scheme constitutes an offence carrying a penalty. In NSW the penalty is $5,500, in WA and the ACT it is $5,000 and in SA it is $20,000.
Is there a requirement regarding the size and colour of the disclosure statement?
The Professional Standards Council provides the following guidance:
“The disclosure statement must be printed in a size not less than the face measurement of Times New Roman typeface in 8 point.
The disclosure should:
- be sufficiently prominent on a practitioner's business documents so that there is a reasonable prospect it will come to the attention of the intended audience - generally on the facing page of the document and in a type size that is easily legible
- be included in digital communication formats such as a practitioner's email to clients and prospective clients.
- appear on brochures and similar promotional material of the practitioner, but need not appear in advertisements in print media, directory listing or similar forms of promotion or advertising.
- appear on websites that promote or advertise the services of the firm.”
There is no requirement in relation to the colour of the disclosure statement.
Do I need to send a letter to clients explaining the scheme?
No. You may choose to provide a written explanation to clients and in this case the Institute has provided a sample letter which can also be downloaded from the Institute’s website. However, this is entirely optional.
Does the disclosure statement need to be included in any advertisements (such as a Yellow Pages advertisement or websites) that I may place
The PSC disclosure policy provides that disclosure need not appear in:
- advertising in print media, directory listings and similar forms of promotion or advertising
- websites serving as an electronic brochure (see further discussion below).
A form of disclosure on some electronic transmissions may be warranted, particularly where the transmission may be interpreted by a client or prospective client as an official document. The disclosure should be included in the digital communication formats such as a practitioner's email to clients and prospective clients. The disclosure must be clearly legible.
Where a website is only promotional material or similar it is not necessary to include a disclosure. Where a website delivers services to clients or prospective clients by ecommerce, a disclosure should be made.
What disclsoure is required where I provide services in multiple jurisdictions, some with no scheme in place?
The PSC Policy Statement provides the following guidance in relation to disclosure where a participating member of the scheme practices in their own state and in another jurisdiction where a scheme is not in place. Members must ensure disclosure is made where work is carried out in a jurisdiction where his/her liability is limited under a scheme.
The options presented by the PSC Policy Statement are:
- Have multiple sets of letterhead, or
- Stamp the disclosure statement on communications to clients in cases where a scheme applies in the jurisdiction where the work is carried out, or
- Include a statement on all communications to clients to the effect that liaiblity is limited by a scheme approved under professional standards legislation in respect of matters arising within their jurisdiction.
These options would also apply to practices where letterhead is used by offices both in the state where a scheme is in operation as well as states where there is no scheme in place.
Does the disclosure statement need to be included in foreign jurisdiction?
PSC advice concerning foreign jurisdiction is that where a person is subject to a Scheme they must include a disclosure statement on their business documents. They should do so irrespective of the jurisdiction in which the service is provided. A report or other document should include a disclosure statement, where the report or other document is not provided under cover of official correspondence that includes a disclosure statement.