Client engagement and relationships

CPA Australia has several templates that our members can use to create your own terms of engagement documentation.

Understanding the terms of engagement

What is a written terms of engagement document or engagement letter?

This is a written agreement between you, as a service provider, and your client, which sets out the agreed terms and conditions of the engagement.

Why is it important to have a written terms of engagement with clients?

Documented terms of engagement represent good practice. We highly recommend you use the CPA Australia template to create your own.

It will help your practice in the following ways:

• It helps set expectations between yourself and your clients: A written Terms of Engagement helps lay a solid foundation for a working relationship between you and your clients. It ensures transparency, educates both parties on obligations, and demonstrate professionalism from the start.
• It clarifies the legal and operational scope: When you’ve set expectations with your client and clearly laid out what’s included with your services, you’ll reduce scope creep. You can also specify how you will proceed if the client needs more work done.
• It protects your legal rights. Using a written Terms of Engagement can help reduce professional indemnity insurance premiums, and many insurers require it. If insurers require them, then engagement letters reduce liability and risk of doing business.

When should you issue a terms of engagement?

It’s best practice to issue a terms of engagement for all new client engagements, including tax return clients.

APES 305: Terms of Engagement is the Accounting Professional and Ethical Standard (APES) that provides guidance for public practitioners on the contents of a terms of engagement. It does not require the Terms of Engagement to be signed, however in accordance with best practice, CPA Australia advises you retain a signed copy on file.

When should you re-issue a terms of engagement?

It is important that your terms of engagement is always kept up to date to reflect the current scope of services provided to your client, even for recurring engagements.

CPA Australia advises members to reissue a new Terms of Engagement if the following events occur:

• any significant changes to the Terms of Engagement including professional standards, applicable accounting assurance standards, or legal and regulatory requirements
• any indication that the client misunderstands the objectives or scope of the engagement
• any significant changes to the professional services being performed for the client
• if a body corporate client has changed ownership or management or where the client’s circumstances have changed
• the performance of the engagement is irregular.

With regard to the ‘Taxation services’ template below, to help in on-going compliance with the Tax Agent Services (Code of Professional Conduct) Determination 2024, we would recommend that the client engagement be renewed annually and, in addition to the Terms of Engagement, members also provide clients with a copy of the Tax Practitioners Board’s Information for Clients factsheet.

Are the terms right for your practice?

It’s important to effectively communicate the terms of engagement that are right for you and your business. Your terms of engagements should differ according to the public accounting services you provide.

Terms of engagement templates

CPA Australia have provided terms of engagement templates available for you to use and tailor to suit your needs. These are designed to meet the requirements of APES 305 Terms of Engagement, along with other relevant professional standards that may apply to each public accounting service.

More information and resources about client engagement

CPA Australia resources

• Client service approach
• Work-related expenses

Video

• Client engagement & authority documentation: ATO, CPA and TPB webinar recording

ATO resource

• ATO: Confidentiality of client information