Why Accountants Need Engagement Letter Templates

Do you know that 1/3rd of professional liability claims against accountancy and CPA firms involved cases where no engagement letters were drafted? Or the fact that the number jumps to nearly 50% for tax-related claims.

Engagement letters are more than just paperwork. They are written and binding agreements between an accountant, bookkeeper, or tax adviser and their clients that outline the scope of work, responsibilities, deliverables, fees and limitations of the service. They are a legal shield.

But drafting proper and comprehensive engagement letters are easier said than done. In this article, we will explore what engagement letters must contain, how to draft them and what happens if accountants are careless.

Risk of Skipping Engagement Letters

Failure to draft and forward engagement letters can expose your accountancy firm to serious risk. In several cases, accountants, CPAs, and accountancy practices were fined millions, which could have been avoided had engagement letters been developed.

Here are some cases that highlight why engagement letters are important for accountancy practices:

•  Erwin vs United States (2010) – A CPA was held personally liable for a client’s unpaid taxes following the lack of a clear engagement letter detailing the responsibilities of each party.
• Scott Group Ltd vs McFarlane (1977) – Auditors were held liable for a $38,000 overstatement in financial statement, which misled a third party during a takeover bid. If there was proper engagement letter in place, it could have been avoided.
• Channel Fabrics, Inc vs Skwiersky, Alpert & Bressler LLP (2023) – A malpractice claim over the accountants was dismissed as the engagement letter clearly stated the limitations of a review engagement. This protected the accountants from liabilities.

These cases clearly underscore the importance of well-drafted engagement letters for accountants.

Using Engagement Letter Templates

Despite all these risks, some accountants tend to overlook engagement letters. We can’t really blame them because engagement letters tend to be tedious, require countless reviews and take hours to develop.

However, using engagement letter templates can make this task simple and fast. A well-structured template eliminates ambiguity, reduces the risk of omissions and ensures compliance with professional standards. By standardising the process, accountants can save time, reduce errors and provide a clear and professional impression to clients from the outset.

Templates also allow for greater efficiency and scalability, especially for firms handling multiple clients or service lines. Instead of drafting each engagement letter from scratch, accountants can quickly tailor a base template to suit individual clients’ needs. This flexibility speeds up client onboarding while ensuring key legal and regulatory elements are never missed. Templates can also be regularly updated to reflect changes in legislation, internal policies or service offerings without starting from scratch each time.

FigsFlow takes this one step further by providing expertly drafted, ready-to-use engagement letter templates tailored specifically for accountants. These templates are designed to align with industry standards and regulatory requirements, helping firms maintain compliance and professionalism effortlessly. With FigsFlow, accountants can streamline their engagement process, reduce admin time and focus more on delivering value to clients. Whether you’re a sole practitioner or a large firm, FigsFlow makes engagement letter management faster, easier and more reliable.

Bonus Tip: Use FigsFlow

FigsFlow is a proposal and engagement letter software that offers:

• Engagement letter templates compliant with ACCA, CIT, CIMA, ICAEW, ATT, AAT etc standards
• Pre-filled terms and conditions as well as data security clauses
• Dynamic and adjustable pricing
• Digital signatures, status tracking, follow-up reminders, multi-currency support and more

Conclusion

Using templates for engagement letters is not just about convenience. It is a smart, strategic move that enhances accuracy, compliance and professionalism.

With the added support of a platform like FigsFlow, accountants can confidently manage their client agreements with ease and consistency. By adopting the right tools and processes, firms can build stronger client relationships while freeing up valuable time to focus on what matters most: delivering expert financial advice.

Sign up for a free 30-day trial of FigsFlow today!