Engagement Letters are Essential to your Practice

As the title implies, you should truly consider engagement letters essential to every service that you provide.  This is regardless of the extent of the service, or the length of time that you have known the client.

Protective wording

A good percentage of professional liability claims arise because the client assumed that the accountant was providing a greater breadth of services than they were actually engaged to.  A thorough engagement letter can be the basis of defense in responding to such an allegation.  This is also why engagement letters should not only include those services that you have been engaged for, but outline those services that you are specifically not providing.

Marketing

In defining what services you are not providing, you open the door to suggest further services that you can provide your client.  While protecting yourself, you are effectively marketing your services.

Satisfied Clients

Many Accountants fear using engagement letters will alienate long-standing clients, or are over complicated for simple engagements.  In reality, clients will be most satisfied when their expectations are based on a clear understanding of the services they are receiving.

Mediation

Finally, each of your engagement letters should include a mediation clause.  This will mitigate the potential severity of any claims that do arise and can be effective in maintaining client relationships when unfortunate scenarios do arise.