Rules of Engagement

Source: AICPA CPA Insider

In this article, attorney Jason Rosenthal offers several tips for improving your standard engagement letter. Here are some of the highlights:

• Describe with precision the work you will do and, just as important, the work you are not agreeing to perform.
• Identify the client, especially if it's part of a complex organizational structure.
• Be clear about your fees – including payment and retainer terms. Include hourly rates of relevant personnel, and if you provide an estimate, be sure it's unambiguously identified as such.
• Clarify which expenses and services are included in your rates and which are not.
• Identify any work that will be outsourced and specify who will be responsible for that work.
• Consider providing that the letter's terms will apply to future engagements (although a separate letter for each new matter is a better practice).
• Specify when the client relationship will end; use a written “disengagement letter” if you withdraw earlier.
• To limit liability, consider restricting what the client can do with your work and who is entitled to rely on it. Also consider imposing a contractual limitations period.
• In the event of a dispute, consider a provision allowing your firm to recover its attorneys' fees if it prevails, as well as provisions specifying applicable state law and the jurisdiction in which disputes will be heard. Also consider an arbitration clause to minimize your legal expenses.
• Consider requiring the client to reimburse you for any legal fees or other costs associated with responding to any subpoenas related to your work.
• If you plan to identify the client on your website or in marketing materials, get permission in the engagement letter.

For the complete article, read “What's in Your Engagement Letter?”

From AICPA CPA Insider, May 2, 2011, http://www.CPA2biz.com.