Sarah Ference, the risk control director at CNA, writes in the Journal of Accountancy that engagement letters serve many purposes: they strengthen the CPA-client relationship by clearly communicating the terms of service and defining the division of responsibilities between the CPA and the client. “Rather than viewing an engagement letter as an administrative hassle or a non-value-added activity, consider it a tool that helps memorialize client discussions and manage expectations.”

Perhaps most importantly, engagement letters are the best defense against professional liability claims: 50% of the professional liability claims arising from tax engagements had no related engagement letter.  The best practice is to aim for 100% engagement letter use in your practice.

 

 

 

 

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