Do you know the ABC's of engagement letters?Good engagement letters can be an essential ingredient in maintaining smooth client relations, insuring solid project planning project planning - project management , and, when all else fails, as effective tools in resolving differences and winning disputes. The most important reason to use an engagement letter is to avoid misunderstandings with a client about the service or services to be performed and the disagreements that could possibly result if there was a misunderstanding. The engagement letter serves to document the contractual duties agreed to by a CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , or his or her firm, and the client. The engagement letter should be used: A. To explain what responsibilities a CPA is and is not assuming. An engagement letter should be tailored for each individual engagement and it should include a detailed description of the services to be provided. For example, an audit engagement letter should indicate that because of the concept of reasonable assurance and because an audit does not involve examination of every transaction, material misstatements including those that occur as a result of fraud may go undetected. B. To explain the client's responsibilities. Although a CPA may help maintain accounting records, suggest appropriate accounting principles, and assist in the preparation of a client's financial statements, the financial statements and the accounting records remain the responsibility of the client. This responsibility should be clearly understood and accepted at the beginning of an engagement. C. To help protect a CPA from legal liability. In today's litigious litigious adj. referring to a person who constantly brings or prolongs legal actions, particularly when the legal maneuvers are unnecessary or unfounded. Such persons often enjoy legal battles, controversy, the courtroom, the spotlight, use the courts to punish environment, it is important that there is no misunderstanding about the work to be performed by a CPA, the level of assurance (if any) to be provided, the client's responsibility for the financial statements, fees, payment terms, etc. Practice Management Self-Test self-test n (COMPUT) → autocomprobación f self-test n (Comput) → test m automatique self-test self n ( Score Sheet The new edition of the "AICPA AICPA See American Institute of Certified Public Accountants (AICPA). Audit and Accounting Manual" suggests these key ingredients for engagement letters. How many are in your engagement letters? * Identification of the client * Records retention policy * Description of the services to be provided * Responses to subpoenas and outside inquiries * Staffing of the engagement * Explanation of how fees and costs will be billed * Description of client responsibilities * Payment terms * Designation of client contacts * Consequences of non-payment * Timing of the work * Alternative dispute resolution Procedures for settling disputes by means other than litigation; e.g., by Arbitration, mediation, or minitrials. Such procedures, which are usually less costly and more expeditious than litigation, are increasingly being used in commercial and labor disputes, Divorce * Consequences of extending completion deadlines * Withdrawal and termination * Requests for additional services * Client signature * Client communications required by the AICPA * Provisions to resolve potential ethical conflicts * Any matter or terms unique to an engagement that are agreed upon Adj. 1. agreed upon - constituted or contracted by stipulation or agreement; "stipulatory obligations" stipulatory noncontroversial, uncontroversial - not likely to arouse controversy in advance of rendering See render. (graphics, text) rendering - The conversion of a high-level object-based description into a graphical image for display. For example, ray-tracing takes a mathematical model of a three-dimensional object or scene and converts it into a bitmap image. services Chuck Landes AICPA Director, Audit and Attest To solemnly declare verbally or in writing that a particular document or testimony about an event is a true and accurate representation of the facts; to bear witness to. To formally certify by a signature that the signer has been present at the execution of a particular writing so as |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion