Writing an Accounting Engagement Letter (with Sample)
Use this sample accounting engagement letter as a template for your formal notification.
Writing an Accounting Engagement Letter
An accounting engagement letter may be provided by a tax accountant, lawyer or small business person to clients for specific purposes. It is essentially a contract in the form of a letter. In some cases, an engagement letter will make it less intimidating for some small businesses or service providers to enter into a contract with another small business. Even though it’s less intimidating, the letter needs to be legal. The purpose of the letter may change for each type of service, but an accounting engagement letter will usually have four basic parts.
The beginning of the letter includes the services being provided to the client. An accounting engagement letter may include several services such as preparing balance sheets and income tax statements.
The second part of the letter will include services that the account will not provide such as reviews and audits. This section may also include any delivery times or deadlines. If either party doesn’t meet a deadline, the contract may be breached.
The third part will include any assistance the client must provide the accountant. This usually includes providing records and filling out paperwork. It may also include any outside help required such as legal advice or outside contractors.
The final part of the letter includes a disclaimer that states the accountant will perform his or her duties to the best of their ability. This section may include the agreed-upon fee and the way it will be paid. For example, hours may be billed weekly or monthly, or a flat fee may be given when the service is complete. If a late payment clause is added, it may be in a separate paragraph.
Below is a sample compilation accounting engagement letter. It is intended to be used for the basic CPA services for financial statements. These services may include assisting the management in presenting financial information in the form of financial statements. It does not include analytical procedures or inquiry or other procedures usually provided in a review or audit. The CPA must act in accordance with Statements on Standards for Accounting and Review Services (SSARSs) and have an understanding of the client’s industry as well as knowledge of the client and his or her financial statements including the appropriate forms. The CPA must also be able to determine if the financial information has any obvious material errors. The sender should include two signed copies of the letter to the client and keep a third copy in his or her files.
If the business has a letterhead that includes its address, it need not be repeated in the letter.
The beginning of the letter includes the services being provided to the client. An accounting engagement letter may include several services such as preparing balance sheets and income tax statements.
The second part of the letter will include services that the account will not provide such as reviews and audits. This section may also include any delivery times or deadlines. If either party doesn’t meet a deadline, the contract may be breached.
The third part will include any assistance the client must provide the accountant. This usually includes providing records and filling out paperwork. It may also include any outside help required such as legal advice or outside contractors.
The final part of the letter includes a disclaimer that states the accountant will perform his or her duties to the best of their ability. This section may include the agreed-upon fee and the way it will be paid. For example, hours may be billed weekly or monthly, or a flat fee may be given when the service is complete. If a late payment clause is added, it may be in a separate paragraph.
Below is a sample compilation accounting engagement letter. It is intended to be used for the basic CPA services for financial statements. These services may include assisting the management in presenting financial information in the form of financial statements. It does not include analytical procedures or inquiry or other procedures usually provided in a review or audit. The CPA must act in accordance with Statements on Standards for Accounting and Review Services (SSARSs) and have an understanding of the client’s industry as well as knowledge of the client and his or her financial statements including the appropriate forms. The CPA must also be able to determine if the financial information has any obvious material errors. The sender should include two signed copies of the letter to the client and keep a third copy in his or her files.
If the business has a letterhead that includes its address, it need not be repeated in the letter.
Sample Accounting Engagement Letter
Name of Sender
Name of Accounting Business
Address of Accounting Business
City, State, Zip Code
DATE
Name of Contact Person
Name of Company or Service
Address of Company or Service
City, State, Zip Code
RE: Accounting engagement
Dear Name of Contact Person:
This letter is to confirm the terms and objectives of my engagement as an accountant from Name of Company including the limitations of the services I will provide to Name of Company.
I will provide the following services:
• With the information provided by your company, I will compile the balance sheet, income, retained earnings and cash flow of Name of Company for the specified year. I will also prepare the federal and state income tax for that year. I will update my previous compilation report for the prior year financial statements. I will do this in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.
• I will not review or audit these statements and will not express an opinion or give any other form of assurance on them. The services will be completed one month after the end of the fiscal year DATE.
• If I am unable to complete the compilation of your Company’s financial statements, I will not issue a compilation report on such statements. It is not part of my engagement to disclose errors or irregularities or any illegal acts including defalcations or fraud that may exist. However, if I see any obvious material errors, I will report them to the management.
My fee will depend on the number of hours my staff needs to fulfil the above requirements. As we discussed earlier, the fee may not exceed $$$. If there is some reason why my staff needs more time to complete the above tasks, I will discuss it with you first.
I am happy to offer my financial services and to work with your company. I will provide the above mentioned services to the best of my ability. If you have any questions, I can be reached at Phone Number or Email Address.
If this letter complies with your understanding of my engagement, please sign the included copy of this letter and return it to me.
Sincerely,
Signature of Sender
Printed Name of Sender
List of Enclosures: Copy of the letter
Signature and Date of Client
By Andre Bradley
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