Engagement Letters & Service Agreements | What’s In A Strong One?
An engagement letter is a written agreement between an accountant and their client that outlines the terms of their professional relationship. This document is essential because it helps to establish the expectations and responsibilities of both parties and can help prevent misunderstandings or disputes down the line. As such, it is important that an accountant's engagement letter contains specific provisions to ensure that the client's needs are met and that the accountant is properly compensated for their services. In this article, we will discuss some of the provisions that should be included in an accountant's engagement letter.
Scope of Services. One of the most important provisions of an accountant's engagement letter is a clear description of the services that will be provided. This section should be detailed and specific, outlining the specific tasks and deliverables that the accountant will provide. This can include things like bookkeeping, financial statement preparation, tax preparation, and auditing services. The scope of services should be tailored to the client's specific needs, and the accountant should be clear about what is included and what is not.
Fees and Billing. The engagement letter should also include provisions outlining the fees and billing arrangements. This should include the accountant's hourly rate, the billing frequency (e.g., monthly, quarterly, or annually), and how the fees will be calculated. It should also include any expenses that the client will be responsible for, such as travel expenses or software subscriptions. The engagement letter should be clear about when payment is due and what happens in the event of late payment.
Termination. The engagement letter should include provisions outlining how the relationship can be terminated by either party. This should include notice periods, the circumstances under which the engagement can be terminated (e.g., breach of contract), and any fees that may be due if the engagement is terminated early.
Confidentiality and Data Security. Accountants often have access to sensitive financial and personal information about their clients. As such, the engagement letter should include provisions outlining confidentiality and data security. This should include a description of how the accountant will protect the client's confidential information and how they will ensure that data is not compromised. The engagement letter should also outline what happens in the event of a data breach and who is responsible for reporting it.
Limitations of Liability. The engagement letter should also include provisions outlining the limitations of the accountant's liability. This should include a description of what types of damages the accountant is liable for and what types of damages they are not liable for. It should also include any limitations on the amount of damages that the accountant can be held responsible for.
Governing Law. Finally, the engagement letter should include provisions outlining the governing law. This should include the state or country whose laws will govern the agreement and any disputes that may arise. It should also include provisions outlining where disputes will be resolved (e.g., in court or through arbitration).
In conclusion, an accountant's engagement letter is an essential document that helps to establish the expectations and responsibilities of both the accountant and the client. It should include provisions outlining the scope of services, fees and billing arrangements, termination, confidentiality & data security, limitations of liability, and governing law. By including these provisions, the accountant can help ensure that the client's needs are met and that they are properly compensated for their services.
If you need help structuring your engagement letter/service agreement, contact The Styles Firm at 404.801.3861 or admin@stylesfirm.com! You may also schedule your consultation directly HERE!