For accounting practices

An accounting engagement letter written for the year-end

The year-end engagement is the one clients think they understand. The letter is where you find out that they thought it included three other things.

Most accounting practices send an engagement letter that describes "accounting services" and a fee. It works until the year the client asks why the corporate return was extra, or why their personal return was not in the price, or why the management accounts stopped in August.

The letter below separates the year-end work from everything adjacent to it, which is where the money and the goodwill both live. It also states what the engagement is not, because "accounts" means one thing to a CPA firm and something broader to the person paying for them.

Free download

Accounting engagement letter

The full letter as a PDF, written for the United States, covering year-end accounts and the filings around them.

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No email required. Or fill one in and we will complete it for you.

What the letter has to separate

An accounting engagement is really three or four engagements that arrive together. Naming them individually is most of the work.

1

The accounts, and what standard they are prepared under

Say what you are producing — year-end financials — for which entity and which period, and on what basis. A compilation under AR-C 80 is a different engagement from a set of management accounts, and the client cannot be expected to know that.
2

The filings, one by one

corporate return, sales tax, payroll year end, personal returns for the directors. List each one as included or excluded. Silence always reads as included.
3

What you are not doing

Not an audit, not a review, no verification of the underlying records, no responsibility for detecting fraud. This sentence is short and it is the most important one in the letter.
4

Who signs off and when

The client approves the accounts before filing. Say so, say what approval looks like, and say what happens to your deadline if it does not arrive.

The accounting engagement letter

Written for United States. The download is the same text as a PDF you can put on your letterhead.

[Firm letterhead]

[Date]

[Client name]
[Client address]

Dear [Client contact],

The engagement

We will prepare the year-end financials of [Client name] for the year ending [date] from the records and information you provide, and prepare the corporate return for the same period.

The basis of our work

We will perform this engagement in accordance with the AICPA's engagement letter guidance, and where it constitutes a compilation, AR-C 80.

This is not an audit or a review. We will not verify the accuracy or completeness of the records you provide, we will express no opinion or assurance on the accounts, and the engagement cannot be relied upon to identify fraud, error or illegal acts.

What is not included

Unless separately agreed in writing, this engagement excludes: bookkeeping or correction of the underlying records; sales tax returns; payroll and payroll year end; personal tax returns for directors, shareholders or their families; management accounts during the year; advisory, valuation or transaction work; and representation in any enquiry or examination by the IRS.

Your responsibilities

You are responsible for maintaining adequate accounting records, for the completeness and accuracy of the information you provide, and for the accounts themselves. You will provide the records we request by [date].

You will review and formally approve the year-end financials and the corporate return before we file anything on your behalf. We cannot meet a filing deadline without that approval.

Fees

Our fee for the work described is [amount] in US dollars, invoiced [when] and payable within [number] days. It assumes the records are complete and reconciled when they reach us. Work arising from incomplete records, and any work outside the scope, is charged at [rate] per hour after we have agreed it with you.

Ending the engagement

Either of us may end this engagement on [number] days' written notice. Fees for work performed to that date remain payable. We will provide your records on request and, where you appoint another firm, respond to a professional clearance request promptly.

Confidentiality, data and retention

We keep your information confidential except where the law or our professional body requires disclosure. We hold it in accordance with applicable state privacy law and retain our files for [number] years after the engagement ends, after which they are securely destroyed.

Agreement

Please sign and return a copy of this letter.

[Name], [Firm name]

Agreed for [Client name]:

Signature ______________________ Date ____________

Before you use this

Supplied as-is, with no guarantee. These templates are general information, not legal advice, and not a substitute for it. Have your own legal adviser review and adapt one to your practice and your jurisdiction before you put it in front of a client. FirmHello accepts no responsibility or liability for any use made of them.

The three arguments this letter prevents

“I thought my personal return was included”

It almost never is, and it is almost never said. One line in the exclusions ends a conversation that otherwise happens every spring.

“Why is the fee higher than last year?”

Because the records arrived in a worse state. Unless the letter said the fee assumed reconciled records, that is your problem rather than theirs.

“You filed it, so you checked it”

The sentence saying you did not verify the records, and that the client approves before filing, is the one that matters when the IRS asks.

Other engagement letters

What it is Engagement letters Bookkeeping Bookkeeping Audit Audit

Questions accounting practices ask

Does one letter cover the accounts and the tax return?

It can, provided both are described separately and priced clearly. Many firms prefer two letters because the work is often done by different people and the tax engagement carries its own professional obligations.

What if the client's records are worse than expected?

That is what the fee assumption clause is for. Stop, tell them what you have found, and quote the remedial work separately. A letter that assumed reconciled records makes that a straightforward conversation.

Do I need a new letter if only the fee changes?

Reissue annually as a matter of course. If the only change mid-year is the fee, a short written variation the client agrees to is usually enough — but it must be in writing and it must be accepted.

Is an engagement letter required by my professional body?

Practice varies by jurisdiction and by engagement type; for some engagements it is effectively mandatory, and the AICPA's engagement letter guidance is where to check. Even where it is not required, it is the document that decides every fee dispute.

The letter is the easy half

Sending it, getting it back signed, and finding it again in two years is the half that eats the week. That is what the portal is for.

No card and no sales call. If you would rather tell us about your firm first, use the longer form.