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- Management’s responsibilities. Management’s role in making decisions, maintaining records, safeguarding assets, reviewing deliverables, and disclosing client information to the CPA firm may be communicated via the terms and conditions. Management responsibilities specific to the services provided can be addressed in the actual engagement letter.
- Reliance on written advice. Specifying that only advice requested and provided in writing may be relied on may assist in the defense against allegations that a client relied on oral advice.
- Responsible person/client contact. The client should be able to identify the party with whom the CPA firm should communicate and rely on for elections, representations, and changes in the engagement scope. Identifying the client’s responsibility to designate such an individual is appropriate for the terms and conditions.
- Payment terms. Timeliness of payment and the consequences of late payments or a failure to pay are important items to agree to in writing. Inconsistent engagement letter provisions provide clients the opportunity to suggest that the firm did not follow its own policies on collecting invoices or the consequences of failing to pay.
- Subpoenas. Many firms reach an understanding with their clients about how to respond to subpoenas. Differing or silent engagement letter treatment can impede a CPA firm in responding to subpoena requests.
- Third-party service providers. When subcontractors receive or retain data, the CPA firm is required to disclose this protocol to the client under ET Sections 1.150.040, 1.300.040, and 1.700.040 of the AICPA Code of Professional Conduct. The terms and conditions are an efficient means of fulfilling this mandate.
- Document retention and ownership. The terms and conditions should explain that client records will be returned at the conclusion of the engagement and that the CPA firm’s records are its property. In addition, the CPA firm’s document-retention policy should be attached or available upon client request.
- Confidentiality. The intended nature of communications between the client and the firm should be delineated and agreed to by the client. The expenses of asserting client confidentiality or privilege if a third party requests client information from the CPA also should be specifically explained and agreed to by the client.
- Dispute resolution. Agreeing in advance with a client on alternative dispute resolution (ADR) and the jurisdiction, venue, and forum for engaging in ADR can expedite the resolution of disagreements.
- Termination and withdrawal. Ensuring that the CPA firm may withdraw for any reason without completing services is important. Examples of reasons for termination can be included. For instance, if the client does not pay or demonstrates questionable behaviors, the firm may wish to withdraw.
- Limitation of liability and indemnification of the firm. Where permissible, these clauses help limit the firm’s exposure if a claim arises. If the engagement is of a type whereby the firm would be precluded from including these clauses, which would impair the independence of the firm, strike these terms from the terms and conditions through a notation in the engagement letter.