Accountants in Canada who have public practice know that small engagements can turn into a full blown legal issue when handled incorrectly. In the case of a dispute, engagement letters in the standard form will not be able to give accountants the protection they need. The terms of engagement should be confirmed in order for practitioners to avoid being placed in a spot where they have to fight legally because of a simple disagreement. This is also why experts recommend accountant professional indemnity insurance in order to protect their practice.
There are two major reasons why clients are often believed more than the accountants in the absence of a written account of their terms of engagement. The first reason is that judges and investigation committees know that a single accountant handles various clients while a client will only have one accountant at a time. The professional might not be able to recall exactly what they have discussed with the clients. The second reason is that accountants are known to be the main responsible party in producing a recorded copy of terms of engagement. This is not the client’s fault of the accountant did not make any solid document.
There are several ways by which an accountant can avoid legal issues when making engagement letters. The first is that the scope should be clear between the two parties. There is no need to draft an engagement letter as long as the scope is documented including the things you have agreed to do and not to do.
Secondly, it is essential to know the identity of the client. This happens when an accountant is hired by a group or a company. It should be clear to the accountant who the members are. If dealing with multiple parties, identify the client relationship that will carry the responsibility in such cases.
Make sure that you have talked about your fees with the client. This is not the job of regulators to do so but the matter will have to reach the court if let unsettled. This is a commercial issue that should not be allowed to turn into a professional problem. Lastly, as an accountant it is your job to have an accountant professional indemnity insurance in order to protect your practice and good name.