Posted on: September 05, 2013 Uncategorized

Why is it important to use a client engagement letter in your CPA practice?

Most lawsuits against accountants stem from malpractice complaints.  A client may think their accountant did not satisfactorily meet their professional obligations – the client feels he didn’t get what he paid for.

By using an engagement letter with every new client, you can drastically reduce your risk of getting sued.  When both parties make it clear in writing that they understand their responsibilities to one another, it makes for much smoother sailing.  There will be very few surprises, and most likely few disputes.  The client will know, without question, the nature and scope of the agreed-upon services.

Such engagement letters seem to be less common among sole practitioners, but they’re growing in popularity as more and more CPAs recognize the benefits.

Engagement letters are also important from the viewpoint of a potential future buyer of your practice.  For example, if you have such good relationships with your clients that they’re willing to sign two or three-year agreements with you, that looks good to a buyer.  They see your firm as having positive clientele.  Furthermore, it shows that your firm has recurring revenue, and that’s something buyers actively look for in a practice.

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