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The document that defines the work

What an engagement letter is in Canada, 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.

Accounting firms, bookkeepers and auditors send an engagement letter before the work starts, and each kind of engagement has its own template on this site. Download the general letter below, free in Word or PDF, or fill one in for a single client with the free engagement letter generator.

Last reviewed against 3 primary sources.

Free download

General engagement letter template

A complete, plain-English engagement letter you can adapt to any professional service, written for Canada, in Word and PDF.

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Use the free engagement letter generator

Type in your firm, the client, the scope and the fee, and it writes a complete engagement letter for Canada, ready to print or save as a PDF. Nothing you type is stored.

Next step: send it to the client through FirmHello, where it stays on their record beside everything else they send you.

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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 T1 personal 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.

You will also see it called a letter of engagement, which is the more usual wording in the UK and Australia. It is the same document with the same job. If what you need is an engagement letter sample to work from rather than the explanation, the engagement letter template page has a complete one, and each engagement type below has its own.

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. 1

    Who the client actually is

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

  2. 2

    What is in scope, in specifics

    "Accounting services" is not a scope. "Preparation of the year-end financial statements and the T2 corporate return for the year ending 31 December" is. The more ordinary the phrasing, the fewer arguments it causes.

  3. 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/HST filings, personal returns for the directors, representation in an audit, bookkeeping clean-up for prior periods.

  4. 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. 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 Canadian dollars. A letter that says "fees will be discussed" has not settled anything.

  6. 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. 7

    Confidentiality, data and how long you keep it

    How client information is held and for how long, consistent with PIPEDA or its provincial equivalent and with the retention period your own professional obligations impose.

A general engagement letter

Written for Canada. The downloads are the same text, as a Word document to edit and a PDF to 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 CRA, 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 the CPA Canada Handbook 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 Canadian 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 PIPEDA or its provincial equivalent 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.

What a Canadian engagement letter has to reckon with

Canada has no single national rulebook for engagement letters. Accountants answer to a provincial CPA body, lawyers to a provincial law society, and the privacy law that applies depends on where the client is. The points here are the ones that change a letter's wording.

Where a point cites CPA Ontario's code, check the equivalent rule in your own province's code before relying on it. The Quebec and federal points apply wherever their conditions are met.

Quebec clients and French

A standard-form letter can be a contract of adhesion, which section 55 of Quebec's Charter of the French Language requires in French. The client may be bound by an English version only after receiving the French one and expressly choosing English, and you cannot charge for the French.

Taking over from another firm

CPA Ontario's code bars accepting an engagement that replaces another accountant without taking reasonable steps to ask the predecessor whether anything should affect your decision. Send the letter after that enquiry, not before it.

Which privacy law applies

PIPEDA covers commercial activity in most provinces, but Alberta, British Columbia and Quebec have private-sector laws treated as substantially similar. Name the law that governs this client in the confidentiality clause rather than citing PIPEDA everywhere.

Fees that cannot be contingent

CPA Ontario's code forbids a contingent fee for an engagement that requires independence, for a compilation and for an income tax return. Where one is allowed, the client must agree the basis in writing before the work is substantially complete.

Where engagement letters go wrong

Signed once, never again

A letter for a T1 personal 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.

Engagement letters by type, and the other letters a firm sends

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 Payroll Payroll Compilation Compilation T1 personal return T1 personal tax T2 corporate return T2 corporate tax Management representation letter Management representation

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.

Is a letter of engagement the same as an engagement letter?

Yes. "Letter of engagement" is the more common phrasing in the UK and Australia and "engagement letter" in the United States, but they name the same document: the written terms of the work, agreed before it starts. Nothing in the contents changes with the name.

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.

Sources

The primary sources this page is written against, last read against it on . Check them before relying on a detail; rules and thresholds change.

  1. LégisQuébec Charter of the French Language s.55
  2. CPA Ontario CPA Ontario CPA Code of Professional Conduct
  3. Office of the Privacy Commissioner of Canada PIPEDA applies to private-sector organizations in commercial activity

What changed

  • Added an editable Word (.docx) copy of the letter beside the PDF.
  • Added the section on what Canadian law adds, written from primary sources, and reviewed the shared letter text for wording that only US law supports.

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.