These letters offer vital protection for you and your clients.
With your time in short supply, engagement letters may not seem a priority, but they should be. Here is why:
A signed engagement letter is:
the contract between you and your client
a requirement within ACCA’s Rulebook.
Disputes with clients
In a dispute between you and a client, a signed engagement letter offers protection to both. Many disputes arise from a misunderstanding about the extent of the accountant’s responsibilities. A well-drafted, signed engagement letter may head off such misunderstandings.
Complaints handling procedures:
Members in the UK and Ireland are required to implement adequate procedures to handle client complaints concerning fee, service and contractual disputes (Regulations 13-18, section B9 of ACCA’s Rulebook).
Rather than being a burden, these are in fact an opportunity for you to address client concerns directly, improving the level of client care and potentially avoiding complaints to ACCA. Many disputes could be resolved sooner through robust internal complaints-handling procedures. It is best practice to include details of the procedures you have in place in your engagement letters.
Ensure that your complaints procedures are explained to clients and agreed in writing from the outset.
Complaints to ACCA
Should a client complaint escalate to ACCA, the signed engagement letter is likely to be requested. If you are able to provide it, the signed engagement letter should help ACCA to establish the respective responsibilities of you and your client and this can assist in resolving a complaint.
Not having an engagement letter may lead to unexpected liability. This is illustrated by the two contrasting cases briefly outlined below, which you may already be familiar with:
Burgess & Anor v Lejonvarn  EWHC 40 (TCC)
The defendant (architect) performed some services free of charge in relation to her friends’ (claimants) gardening project. They claimed for the cost of remedying defective work carried out under her supervision. There was no contract. Nevertheless, the judge determined that:
the claimants would reasonably have had the impression that the defendant was professionally capable of project-managing the garden redevelopment and she assumed responsibility by holding herself out as project manager
the defendant could potentially be held liable for financial loss suffered by the claimants as a result of defective ground works she had supervised.
Mehjoo v Harben Barker  EWHC 1500
The Court of Appeal considered whether Harben Barker (HB) had breached its duty. HB was a general practitioner in accountancy and the work HB said it would carry out on behalf of Mr Mehjoo in its engagement letter was that of a general practitioner. HB explained in its engagement letter that it could provide more ‘extensive’ tax advice if requested by Mr Mehjoo. However, he did not do so.
It was concluded that:
tax advice which HB had failed to give (about a bearer share warrant scheme) comprised specialist tax advice which one would not expect a reasonably competent general practitioner to know. Therefore HB had not breached its duty
it was sufficient for HB, as a general practitioner, to make reference to more ‘radical’ tax saving schemes and it was for Mr Mehjoo to request further information as per the terms of the engagement letter.
Be clear about exactly what work you will perform and agree this with your client in writing.
All members of ACCA are bound by ACCA’s Rulebook and you should be familiar with its contents. The Rulebook states that members in practice must obtain a signed engagement letter from every client and retain a copy. The detailed requirements are at Regulation 5, section B9 of ACCA’s Rulebook.
If you do not hold a copy of an engagement letter which has been signed by the client, it is a breach of this Regulation. This is something that ACCA’s Investigations department would investigate if it came to their attention.
Take the time to familiarise yourself with ACCA’s Regulations, review your procedures and make sure that you comply.
ACCA’s engagement letter templates are available for members to purchase. These are currently being revised to reflect the General Data Protection Regulation (GDPR) and a revised version will automatically be sent to anyone who has previously purchased the current version of this product.