Client engagement letters: Your questions answered
Engagement letters are a basic building block of the practitioner-client relationship and a key requirement of CPA Australia’s quality review process. A recent CPA Australia public practice webinar discussed client engagement letters and this article presents some of the questions and answers. Here’s what you need to know.
Do we need an engagement letter even for simple one-off I-return tax returns? Clients sign the tax return declaration anyway.
You need a form of engagement document, but you don’t necessarily need customised letters. An engagement brochure meets the requirements of APES 220 Taxation Services and APES 305 Terms of Engagement. You should make sure that the client acknowledges receipt.
An engagement document is a useful tool which can also be used to clearly outline the responsibilities of the practitioner and the client in relation to the engagement being performed at the start of the engagement.
It is also often called on by debt recovery agencies when attempting to recoup fees in arrears. A tax return declaration is signed at the completion of the engagement and only relates to what is in the return; for example, it does not set out your fees and charges.
In the sample engagement letter, where is the paragraph relating to clients providing agents with authority to use the tax agent portal and other tax portal related activities?
You will need to insert this into your engagement letter as there is currently no standard wording in CPA Australia’s templates, but this is under review.
Should engagement letters for individual taxpayers be issued every year?
Technically no, if the terms/scope don’t significantly change. The risk is not being aware when the terms have significantly changed from what is contained in the current engagement document, such as the fee or the scope of work. If you have revised a standard engagement brochure for I-Returns, ensure that the client acknowledges receipt of the revised document.
It is also important to bear in mind that if you are only seeing an I-Return client once a year there are many things that may have changed that may impact on your engagement with them.
The ATO online services portal asks us to agree to two specific sign-off questions when adding a client. Are they covered off under CPA Australia’s sample engagement letter?
Provided you have an engagement letter and it’s clear what the scope of engagement is, then it is OK to agree to the two sign-off questions when adding the client to the portal.
Are you required to disclose fees on engagement letters?
Technically no, but specifying the fee is one of the principal reasons for having an engagement letter and is also used in the instance there is a fee dispute.
For client engagements where the scope does not change year to year, but the fee might, the engagement letter can refer to a fee schedule on your website. This must be easy to locate and reflect fees charged for the current and past periods.
Is there a sample letter to inform clients about an increase in our fees?
No, however, the current standard engagement letter template has a clause on fees that includes pro forma text for advising clients on the circumstances under which fee arrangements may change. Practitioners may customise this paragraph to suit their individual requirements.
Alternatively, if the increase in fees is the only change, and the change is not significant, a member may consider issuing an addendum to the current engagement document in place of advising of the fee increase.
What do we need to include in the engagement letter if the client is signing it digitally?
The requirements are the same, irrespective of the format of the letter.
Will CPA Australia’s standard templates be updated with the advent of single touch payroll (STP)?
We will be reviewing our engagement letter templates with regard to STP and authorities to act.
Engagement documentation resources