The Bulletproof Engagement Letter
I have seen some terrible Engagement Letters prepared by accountants, and to my horror, I've even seen many accounting firms not using Engagement Letters at all! So let’s clear this up straight away:
“If you are providing professional accounting services to the public, you MUST communicate to your client the terms of the engagement. It is an ethical and professional requirement. You will lose your membership and practising certificate if you breach this requirement.”
So here’s the boring legal stuff: If you are in public practice (sole practitioners included) and you don’t believe you need to prepare a document to communicate to your client the terms of engagement, then I refer you to APS305 – Terms of Engagement. This document clearly states that if you are providing professional accounting services to the public, then it is mandatory that you follow APS305, in that you must provide some form of written document outlining your Terms of Engagement to your clients. I am still surprised today the number of accounting firms, especially sole practitioners, and even multi-partner firms, who do not think they need to prepare some form of written communication, AND get their clients’ to sign off on it before they start any work.
BUT here’s the problem – You can’t be bothered because it is a legal, boring and onerous task that you would rather not do. Maybe it’s up there with things you want to avoid like going to confession or visiting the dentist.
So let me make it easy for you.
So here’s the good “What’s in it for me?” stuff: In my 20 years in public practice, my “Bulletproof” Engagement Letter has made me money and saved me money. A lot of money! You need to switch your mindset and think that by having a solid, well worded, plain English, often reviewed and regularly revised Engagement Letter as a critical tool in your arsenal, you are protecting your hard earned accounting fees and your business.
The Engagement Letter, in my opinion has only two purposes and they are very selfish purposes that all accountants must embrace:
1. To make you Money
2. To save you Money
You’re in business aren’t you? So the above 2 points are vital aren’t they? Good, if they aren’t then you shouldn’t be in business.