Engagement letters for accounting practices: what to include and how to get them signed

Every accounting practice has a client who insists they never agreed to pay for something. Usually it is work that crept in during the year: an extra entity, a set of amended returns, an hour on the phone with the bank. The engagement letter is where that argument is won or lost, months before it starts.

For members of the Australian accounting bodies there is also a professional standard behind it. APES 305 Terms of Engagement requires members to document and communicate the terms of each engagement to the client, and sets out factors to weigh when deciding whether to reissue or amend the terms for a recurring engagement.

This guide covers what an engagement letter should include, how to deal with groups and annual renewals, and how to get letters signed without spending a month on reminders. Your professional body and your professional indemnity insurer may have their own templates and requirements, and they take precedence.

Why the letter matters

An engagement letter does three jobs. It sets out what you will do and what you will not. It sets out what the client must do, and by when. And it sets out how you will charge.

Each of those jobs protects both sides. A client who knows the scope does not expect the extra work for free. A client who knows their own responsibilities knows that late records mean late lodgement. A client who knows the fee basis is less likely to be surprised by the invoice.

A letter that is signed and current does all three. A letter from four years ago, for a scope that has since doubled, does none of them.

What to include

Most engagement letters cover the same ground.

The parties. Your practice, and every client entity the letter covers, by its full name. Individuals, companies, trusts and partnerships are separate clients, even when the same family sits behind them all.

The scope. The services you will provide, for which entities, for which periods. Be specific: "preparation and lodgement of the 2026 income tax return" is clearer than "tax services".

What is out of scope. The work you will not do under this letter, such as audit, amendments to earlier years, or advice on a particular transaction, and how that work will be quoted if the client asks for it.

The client's responsibilities. Providing complete and accurate records, meeting the dates you need them by, and telling you about changes in their circumstances.

Fees. The basis for your fees, whether fixed, hourly or a combination, when you will invoice, and when payment is due. If your fees are fixed, a fee schedule attached to the letter is clearer than a figure buried in a paragraph.

Timeframes. When you will do the work, and the deadlines that depend on the client.

Privacy and information. How you collect, hold and use the client's information, with a reference to your privacy policy.

Limitation of liability. If your practice participates in a professional standards scheme, the letter should tell the client that your liability may be limited under the scheme, in the form the applicable legislation requires.

Ending the engagement. How either side can end it, and what happens to work in progress and to the client's records.

Groups of entities

A client group with a family trust, a company and two individuals raises a practical question: one letter or several?

A single letter that lists every entity is easier to send and sign, and works well when the same people control every entity and the scope is similar for each. Separate letters are clearer when the entities have different controllers, such as an adult child's company sitting in a parent's group, or when the scope differs a great deal.

Whichever you choose, every entity covered must be named, and every person signing must have the authority to sign for the entity they sign for. Record who signed for which entity.

Renewing each year

For recurring engagements, APES 305 asks you to consider whether the engagement document needs to be reissued or amended rather than requiring a new letter every year. Many practices send a fresh letter each year anyway, and there are good reasons to. Scope drifts. Fees change. Entities are added. A new financial year is a natural point to confirm all of it.

Two things make the annual round less painful. First, send it early, before the busy season, when clients have time to read it. Second, only ask the client to read what changed. If you use a template, most of the letter will be identical to last year's, and the client needs to see the differences, not re-read the whole thing.

When you amend a letter part way through the year, keep the original and the amendment together, so the history of what was agreed is clear.

When the scope changes mid-year

Scope rarely changes at the start of the year. It changes in March, when the client buys a property through a new trust, or in May, when the bank asks for management accounts nobody planned for.

The safest habit is to put the change in writing before starting the work. A short variation that names the new work, the entity it is for and the fee basis, signed by the client, is enough. It takes a few minutes and closes off the argument about whether the extra work was agreed.

If the change is large, such as a new entity with its own compliance obligations, a fresh letter for that entity is usually clearer than a variation to the old one.

Getting it signed

APES 305 accepts an engagement document in electronic form, and prefers the client's confirmation to be in writing. Where a law does require a signature, the Electronic Transactions Act 1999 (Cth) and its state and territory equivalents allow an electronic one if the method identifies the signer and shows their intention in respect of the document, the method is as reliable as appropriate for the purpose (or is proven in fact to work), and the person receiving the signature consents to that method.

What matters more in practice is the evidence. If a client later disputes what they agreed to, you want to show which version of the letter they signed, when, and that it has not changed since.

Briefi Sign is built for this. You can send an engagement letter from a template or import the Word or PDF letter you already use. The client signs by drawing or typing a signature. Every signed document carries a certificate page recording the time, IP address, device and location of each signature, with a SHA-256 digest of the document, so any later change to the document would show. A fee schedule can sit inside the signed document, so the fees the client saw are part of what they signed. When a letter is amended, initials already given are carried forward, and co-signers, such as two directors or the trustees of a trust, each sign through their own link or together.

For the annual round, a document request can go out with the letter, so the client sends their records at the same time as they sign.

A checklist before you send

Every client entity named in full.

Scope specific to the services, entities and periods.

Out-of-scope work listed, with how it will be quoted.

Client responsibilities and the dates you need records by.

Fee basis, with a fee schedule if your fees are fixed.

Privacy reference and, if it applies, the professional standards scheme wording.

How the engagement ends.

Signers identified, with authority for the entities they sign for.

A letter that covers all of this will not stop every fee dispute. It will make most of them short.

This article is general information. It is not legal advice. For how APES 305 and your insurer's requirements apply to your practice, speak to your professional body or a legal adviser.

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