When you hire an accounting firm it’s very important to describe the duties and responsibilities to the firm in order to maintain the accounting functionality of the business. So, that’s when the role of an Engagement letter comes into existence.
An Engagement letter is a signed agreement between a client and an accounting firm which describes the relationship that they are supposed to carry along with the roles and responsibility of the accounting firm to be performed. It’s an outline of work, roles and responsibility allotted to the accounting firm.
Before you hire an accounting firm, the foremost thing that you should focus on is to make an Engagement letter.
Creating an Engagement letter before hiring gives you the opportunity to think about what must be added and what must be avoided in order to maintain the performance, and the liability of the accounting firm towards your business.
These three things are an essential part of the Engagement Letter.
I. Communication Mode: It’s very important to state a communication mode to be utilized while communicating important information to the accounting firm so that miscommunication can be avoided. I.e. e-mail can be used for this purpose.
II. Delivery Deadlines: This can be marked as the core part of the Engagement Letter, the deadlines of submitting the project must be stated clearly in the latter, which can provide the accounting firm with a clearer view.
III. Information to be communicated to the accounting firm: An Engagement letter also contains the necessary information to be provided to the accounting firm so that the firm can work accordingly.
Engagement letter delivers nitty-gritty of the business to the accounting firm and thus contains a good amount of weight.