How Do You Write an Accounting Engagement Letter?


Quick Answer

To write an engagement letter for auditing, determine the extent of services to be provided, set the period for conducting audit fieldwork, and specify the costs and fees, instructs the Houston Chronicle. Moreover, include a statement regarding the focus of the audit on professional standards and generally accepted accounting principles.

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Full Answer

An engagement letter must state the particular services to be offered, allowing the audit client to understand that consulting and filing of tax returns are not involved, states the Houston Chronicle. Include a list of relevant deliverables for the audit, such as an assessment of internal controls. Set a time frame for completion of the audit to prevent misunderstandings. Some audit procedures entail the help of personnel and access to corporate records.

To avoid disputes related to professional fees, state the billing rates for the staff and partners as well as an estimate of overall costs, recommends the Houston Chronicle. Additionally, include terms regarding direct cost reimbursement, especially for travel expenses. Be sure the fees do not depend on the result of the audit.

State that the audit does not cover fraud detection and other potentially illegal activities to reduce professional liability, notes the Houston Chronicle. Add a mediation clause, which helps prevent formal litigation and resolves possible disputes. Finally, secure a signed copy of the engagement letter from an authorized representative of the client.

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