Engagement Letter Do’s And Don’ts

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Engagement Letter Do’s And Don’ts

Engagement Letter Do’s And Don’ts

Engagement letters help improve communication with shoppers, document engagements, and shield you from litigation. By clearly defining an engagement’s scope and companies, you can better avoid misunderstandings.

What you should do:
State the aim of the engagement
Define the scope of the engagement (specifically what you will and received’t do)
Specify identified negative circumstances or adverse conditions
Note consumer instructions, duties, deliverables and dates
Note reliance on info supplied by shopper
Outline phrases of fee collections and the results of late payment
Include a cease-work clause
Indicate your report retention policy
Embrace third-party service provider language, if applicable
Verify client’s acknowledgment to the phrases of the Bookkeeping engagement letter template and request shopper’s signature

Additional areas to consider:
Embody warnings relating to inadequate internal controls
Clarify limitations relating to financial statement distribution
Include different dispute resolution language (i.e., mediation for all disputes and an arbitration clause for charge disputes only)
Evaluation efficacy of limitation of legal responsibility clauses along with your risk advisor or authorized counsel

What you should keep away from:
Promotional information and different forms of advertising in your engagement letter. Defer advertising information to other documents. Your engagement letter should be considered as a contract and composed accordingly. It isn't the place to convince a client that your firm is the answer to all their problems. It limits your providers, relatively than selling them.
All-encompassing language that expands slightly than limits the scope of your work.
Legal jargon, ambiguity, abbreviations or words only a CPA would understand. Make your engagement letter easy for your consumer to understand. Review the letter together with your consumer and get a signature earlier than starting any work.


Here are just a few ideas on the way you may improve this process:

1. Have a nose to nose assembly together with your consumer to debate the terms of the engagement and to go through the engagement letter.

2. Have your consumer initial important clauses to ensure they perceive their obligations to ensure the engagement is accomplished efficiently and on time.

3. Include wording that a change order shall be required should the scope of the work change throughout the course of the engagement.

4. Guantee that a "stop work" clause is included that tells the consumer that every one work will stop if the payment phrases should not followed.

Embody the next schedules as an attachment to your engagement letter:

5. A description of examples of labor that's within the scope of the audit or review and examples of work that's outside the scope of the engagement. It's essential educate your shopper about these matters.

6. A pattern change order that might be issued ought to the scope of the engagement change.

7. A duplicate of your agency credit policy.

Please give this some thought and then act to improve your engagement management by managing your clients’ expectations. Just think what your life can be like for those who may capture a significant proportion of your write-downs. You would possibly even be able to work less and make more.