Engagement Letter Do’s and Don’ts

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

What you should do:

  • State the purpose of the engagement
  • Define the scope of the engagement (specifically what you will and won’t do)
  • Specify known negative conditions or adverse situations
  • Note client instructions, responsibilities, deliverables and dates
  • Note reliance on facts provided by client
  • Outline terms of fee collections and the consequences of late payment
  • Include a stop-work clause
  • Indicate your record retention policy
  • Include third-party service provider language, if applicable
  • Confirm client’s acknowledgment to the terms of the engagement and request client’s signature

Additional areas to consider:

  • Include warnings regarding inadequate internal controls
  • Explain limitations regarding financial statement distribution
  • Include alternative dispute resolution language (i.e., mediation for all disputes and an arbitration clause for fee disputes only)
  • Review efficacy of limitation of liability clauses with your risk advisor or legal counsel

What you should avoid:

  • promotional information and other forms of marketing in your engagement letter. Defer marketing information to other documents. Your engagement letter should be viewed as a contract and composed accordingly. It is not the place to convince a client that your firm is the answer to all their problems. It limits your services, rather than selling them.
  • all-encompassing language that expands rather 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 client to understand. Review the letter with your client and get a signature before beginning any work.


Interested in Complimentary Cybersecurity Loss Prevention Tips and Advice?

Cyber security is a major area of concern for CPA firms, as ransomware and cyber extortion represent one of today’s more malicious types of hacker attacks. CAMICO has put together Cybersecurity Best Practices for CPA Firms. Download 7 free resources including: a checklist to help determine if you’re protected from hackers and cyber risk; critical steps to take in the event of a breach; and loss prevention tips for better cyber security. Don’t miss out. Download Today!

Share this post

Leave a comment

Filtered HTML

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

Latest Articles

  • 05 Jul

    Engagement Letter Do’s and Don’ts

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

    What you should do:

  • 26 Jun

    Managing the Risks of Serving Cannabis Clients

    Experts predict that America's cannabis industry will continue to grow over the next four years — even with ambiguity emanating from the White House.1 The legal cannabis market was worth an estimated $7.2 billion in 2016 and is projected to grow. Medical marijuana sale... read more