Why Engagement Letters Matter More Than Ever
An engagement letter isn’t just paperwork—it’s a legal safeguard, a compliance necessity, and a business protection tool for accounting firms. Yet, many firms either overlook them entirely, fail to update them, or use weak templates that don’t fully protect them from risk.
With the rise in regulatory scrutiny and increasingly demanding clients, now is the time to reassess your engagement letter process. Here’s why they are essential and how firms can improve them.
The Top 5 Mistakes Firms Make with Engagement Letters
1. Unclear Scope of Work
Firms often fail to define exactly what is (and isn’t) included in their services. This leads to scope creep, where clients assume additional work is included without additional fees.
Fix it: Clearly outline the exact services covered and specify how any out-of-scope work will be billed.
2. Missing Key Clauses for Protection
Some firms don’t include essential terms that protect them legally and financially. This includes fee structures, payment deadlines, dispute resolution procedures, and client responsibilities.
Fix it: Include sections covering fees, late payments, conflict resolution, and obligations on both sides.
3. Not Reviewing Engagement Letters Annually
Regulations, fees, and firm policies change, but many firms use the same engagement letter template for years.
Fix it: Review engagement letters every 12 months and update them for new compliance rules (e.g., TPB engagement letter guidelines, CPA engagement letter template, CAANZ engagement letter tool, IPA and NTAA templates).
4. No Clarity on Conflicts of Interest
Many firms assume conflicts of interest don’t apply to them, but situations like divorcing clients, business partnerships splitting, or referrals can create major ethical and legal challenges.
Fix it: Add a conflict of interest disclosure section and clarify when services will need to be terminated or reassigned.
5. Not Using Digital Engagement Letters & Automation
Chasing clients for signed engagement letters slows down onboarding and increases admin time.
Fix it: Use Seamlss to automate engagement letters, track client approvals, and ensure compliance.
What the TPB & Professional Bodies Expect
While engagement letters are not mandatory under the TPB Code of Professional Conduct, the TPB strongly recommends them to avoid disputes. CPA, CAANZ, IPA, and NTAA also provide engagement letter templates and guidelines. Best practice is to issue one annually and for any change in engagement.
- TPB Engagement Letter Guidelines
- CPA Australia Engagement Letter Template
- CAANZ Engagement Letter Tool
- NTAA Templates
- IPA Templates: Download.
How to Automate & Improve Your Engagement Letter Process
- Move away from manual engagement letters. Paper-based or Word document templates slow down onboarding and create compliance risks.
- Use a client portal for e-signatures & tracking. Tools like Seamlss allow firms to send engagement letters digitally, get notified when they are signed, and track compliance.
- Integrate engagement letters into your workflow. If you’re already using tools like Xero, MYOB, or FYI, ensure engagement letters sync with client records.
- Prevent scope creep by outlining clear service inclusions and automating follow-ups for agreement renewals.
- Use Seamlss to customize engagement letter templates tailored to your firm’s services and risk management.
📢 Seamlss makes this easy. Learn how we help firms automate engagement letters → Book a Demo
Ready to Improve Your Firm’s Engagement Letters?
Updating your engagement letter process is a quick win for protecting your firm, ensuring compliance, and improving client relationships.
✅ Next Step: Review your current engagement letter & compare it against best practices. Need help? Check out Seamlss’ automated engagement letter solution.
🚀 Want to see how it works? Book a Free Demo
This post pairs perfectly with our latest blog on Disengaging Clients. Read it here