The document that defines the work

What an engagement letter is, and what yours must contain

An engagement letter is the written agreement between a firm and a client that says what work is being done, what it costs, what the client has to supply, and what happens when any of that changes.

It is the least glamorous document in a practice and the one that decides how every difficult conversation goes. Scope creep, an unpaid invoice, a client who believed the individual tax return included their rental property — each of those is a disagreement about something the letter either said or did not.

It is also, in most practices, the last thing to get updated. Firms sign a client in March, do the work, and send a letter written for a different service in a different year. The templates below are a starting point for fixing that, one engagement type at a time.

Free download

General engagement letter template

A complete, plain-English engagement letter you can adapt to any professional service, written for Australia.

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

The seven things a letter has to settle

Different professions add their own clauses, but every engagement letter worth sending answers these. A letter that skips one is where the argument starts.

1

Who the client actually is

Name the legal entity, not the person you talk to. "Devlin Brothers Pty Ltd" and "Ray Devlin" are different clients with different liabilities, and a letter addressed to the wrong one is difficult to enforce against either.
2

What is in scope, in specifics

"Accounting services" is not a scope. "Preparation of the year end financials and the company tax return for the year ending 31 December" is. The more ordinary the phrasing, the fewer arguments it causes.
3

What is explicitly out of scope

The clause that earns its place. Name the things a client might reasonably assume are included and are not — GST filings, personal returns for the directors, representation in an audit, bookkeeping clean-up for prior periods.
4

What the client has to give you, and when

Most late work is late because something never arrived. Put the client's obligations in writing: the records, the deadline, and what happens to your timetable when they slip.
5

Fees, and what triggers a different fee

State the fee, what it covers, when it is invoiced, and the rate that applies to work outside the scope. Amounts in Australian dollars. A letter that says "fees will be discussed" has not settled anything.
6

How either side ends it

Notice period, what happens to work in progress, and what is payable on termination. Also who keeps what: a client is entitled to their own records, which is not the same as your working papers.
7

Confidentiality, data and how long you keep it

How client information is held and for how long, consistent with the Privacy Act 1988 and with the retention period your own professional obligations impose.

A general engagement letter

Written for Australia. 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],

Purpose of this letter

This letter sets out the terms on which [Firm name] will provide services to [Client name]. It replaces any previous engagement letter between us. Please read it, and tell us if anything does not match your understanding of what we agreed.

Scope of the engagement

We will [describe the service in specific terms, naming the period or the filing it relates to].

This engagement does not include [name the exclusions: other filings, other entities, prior periods, representation before the ATO, or advice of any other kind]. If you would like us to take on any of that, we will agree it separately in writing.

Your responsibilities

You are responsible for the completeness and accuracy of the records and information you provide, and for keeping the underlying records themselves. We will rely on what you give us without independently verifying it unless this letter says otherwise.

We will ask for the information we need by [date]. If it arrives later than that, we may not be able to meet [the deadline], and any additional work caused by the delay will be charged at the rates below.

Our responsibilities

We will perform the work with reasonable care and skill, in accordance with APES 305 Terms of Engagement and the ethical requirements that apply to our practice.

Our work is not designed to detect fraud or error, and should not be relied on to do so, unless the scope above expressly says otherwise.

Fees

Our fee for the work described above is [amount] in Australian dollars, invoiced [when]. Work outside that scope is charged at [rate] per hour. Out-of-pocket costs are charged as incurred.

Invoices are payable within [number] days. We may suspend work on overdue accounts, and we will tell you before we do.

Ending the engagement

Either of us may end this engagement by giving [number] days' written notice. You remain liable for fees for work done up to that point. On request we will return your own records; our working papers remain ours.

Confidentiality and your information

We keep your information confidential except where we are required to disclose it by law or by our professional body. We hold it in accordance with the Privacy Act 1988 and retain it for [number] years, after which it is securely destroyed.

Agreement

Please sign and return a copy of this letter to confirm that these terms are agreed.

Yours sincerely,
[Name], [Firm name]

Agreed on behalf of [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.

Where engagement letters go wrong

Signed once, never again

A letter for a individual tax return in 2019 does not cover the advisory work you did last month. Most firms need a fresh letter per year, or per engagement, not per client.

Scope written to be flattering

Broad, warm language about "supporting your business" reads well and settles nothing. The exclusions do the work.

Never actually returned

A letter sent and not signed is evidence of what you proposed, not of what was agreed. Chasing the signature is the whole point of sending it, and it is the part firms drop.

Other engagement letters

Template and samples Templates Bookkeeping Bookkeeping Accounting Accounting Audit Audit Tax preparation Tax preparation Legal services Legal Forensic accounting Forensic Fiduciary accounting Fiduciary Appraisal Appraisal

Questions firms ask about engagement letters

Is an engagement letter legally binding?

Generally yes — it is a contract, and it behaves like one once both sides have agreed to it. That is exactly why the scope and the exclusions matter, and why a template should be reviewed by your own adviser before you use it.

Do I need a new one every year?

For recurring work most firms issue one annually, because fees, scope and deadlines change. For one-off work, issue one per engagement. A letter that is several years old and describes a different service is weak evidence of what was agreed.

Does the client have to sign it?

You want them to. An unsigned letter can still be evidence of agreed terms if the client carried on and accepted the work, but that is an argument rather than a fact. A signed copy ends the discussion.

What is the difference between an engagement letter and a contract?

Very little in substance — an engagement letter is a contract written in the form of a letter, which is the convention in professional practice because it reads as correspondence rather than as a document the client needs a lawyer to open.

Can I just use a template?

As a starting point. These are written to be adapted to your practice, your service and your jurisdiction, and they are not legal advice. Have your own adviser review the version you intend to send.

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.