Engagement letter template for accountants: every section and the rule behind it

What an accountant’s engagement letter must contain

APES 305 Terms of Engagement says a member in public practice in Australia shall document the terms of engagement and communicate them to the client. It should happen before the engagement starts where possible. The revised standard applies to engagements starting on or after 1 January 2025.

The document doesn’t have to be a letter. APES 305 accepts a standard handout or an electronic communication. Audits have their own standard, ASA 210, and APES 305 says complying with it should also meet APES 305.

Paragraphs 4.2 to 4.10 list the matters most engagement documents should consider: purpose, objectives, scope, outputs, responsibilities, other accountants involved, fees, ownership of documents and the client’s confirmation. Read them as the outline of the letter, varied to fit each engagement.

The Tax Practitioners Board recommends a written agreement before you start work, rather than requiring one. Section 45 of the Tax Agent Services (Code of Professional Conduct) Determination 2024 does set what clients must be told in writing. It has applied to every registered tax practitioner since 1 July 2025, and to practitioners with more than 100 employees since 1 January 2025.

• That the TPB keeps a register of tax and BAS agents, and how to search it.
• How to complain about a tax agent service, including the TPB’s complaints process.
• General information about your obligations as a registered tax practitioner, and the client’s obligations to you.
• Any prescribed event in the last five years, such as a suspension, and any condition on your registration.

The first three go to each client at engagement or re-engagement, or when the client asks. A prescribed event or condition is disclosed when a client enquires about engaging you, and to existing clients within 30 days. In the TPB’s example of meeting section 45, the information goes on the website you promote your services with and in each letter of engagement or re-engagement. The TPB’s Information for clients factsheet goes with the letter.

Recurring or one-off engagements, and one letter per entity

Most compliance work is a recurring engagement: the same services each year, on unchanged terms, with a defined start and end each time. APES 305 lets that letter stand from year to year. It asks you to consider reissuing it after a significant change in the scope, services or terms. A change of ownership or management, a big change in the business, or a change in standards or the law are triggers too.

One-off work gets its own letter, with its own scope, fee and end date. If Ryan Bull asks the firm to set up a new company for the group next year, that’s a separate engagement. It’s also an AUSTRAC designated service, so customer due diligence comes before the work starts.

APES 305 says nothing about one letter per entity, but the TPB does. Its guidance on letters of engagement recommends a separate letter for each client when you act for related clients. Its examples include a company and its directors, a partnership and its partners, and a trust’s trustees and its beneficiaries.

The UK working party guidance from CIOT, ATT, ACCA and AAT says the same unless agreed otherwise. It makes an exception for a group of companies. A single letter to the parent can work if the parent can bind every company, the members are listed, and the client must report changes to the group.

For a family group, following that guidance means one letter per entity, built on the same standard terms and sent together for signature. Each letter has its own schedule of services and fees, and someone with authority for that entity signs it.

The engagement letter template, section by section

This worked example is the 2026–27 letter pack from Sample Partners, a fictional firm, to the Bull family group. It has three recurring engagements, so three letters on the same standard terms: Ryan Bull, Bull Antics Pty Ltd and the Crazy Bull Family Trust. The wording below is the company’s letter; the tables show all three schedules. Square brackets mark what each firm changes.

Purpose. APES 305 4.2 suggests opening with the letter’s purpose: to set out and confirm the terms. Name the client in the first paragraph.

The client and who signs. Name the entity, the person signing and the capacity they sign in. Put the duty to report changes in ownership or control on the client.

Objectives, and what the work isn’t. APES 305 4.3 suggests saying that the work is limited to the engagement and that no audit, review or assurance is involved. Add that the work can’t be relied on to find fraud or errors.

Scope. APES 305 4.4 covers the periods, the timetable, the law and standards that apply, any limits, and the information the client provides. Fee disputes start with a scope line that says “accounting and tax”, so name the exclusions too. The Division 7A schedule is in scope here because Bull Antics has lent money to Ryan; our Division 7A guide covers that calculation.

What the client provides. APES 305 4.6 suggests stating that the client is responsible for the completeness and accuracy of what it supplies. Name the records and the dates you need them.

What the firm is responsible for. APES 305 4.6 also covers the firm’s side: confidentiality, the professional body’s quality review program, and the firm’s obligations on non-compliance with laws and regulations (NOCLAR).

Cloud systems and outsourcing. If any of the work is outsourced, APES 305 3.6 requires you to name the provider, where the work happens and what it covers. For cloud software that isn’t outsourcing, 3.7 says you should name the provider, where it operates and how the client’s information is stored.

Fees. APES 305 4.8 covers the basis of the fees, including any referral fees or commissions, and the billing schedule. Fixed fees per service make the scope line and the invoice agree.

Liability. APES 305 4.5 covers who may use the outputs and any limit on liability. If you’re a participant in a professional standards scheme, such as the CA ANZ or CPA Australia scheme, 6.2 requires you to disclose that your liability may be limited. Professional Standards Legislation prescribes the statement. The Professional Standards Councils say it belongs on letterhead, letters and emails to clients, in at least 8-point Times New Roman.

Documents, data and lien. APES 305 4.9 says to make clear who owns the documents and data, and to disclose any policy of exercising a lien, with how disputes over it are handled.

Privacy, the TPB register and complaints. This is where the section 45 information goes. The TPB also suggests putting your registration number and a link to your register entry in the letter.

Anti-money laundering. From 1 July 2026, AUSTRAC’s rules apply to accountants only for designated services, such as creating or restructuring a company or trust. Our client onboarding checklist covers the list. Say in the letter which side of the line the work sits.

Changes and ending the engagement. The CIOT and ATT guidance says terms can only be varied by agreement. Posting new terms on your website isn’t enough on its own.

Confirmation. APES 305 4.10 asks for the client’s confirmation, preferably in writing. Its definition of writing includes words in an electronic format, so an e-signature counts.

How to roll out a new engagement letter template

1. 01

   Settle the standard terms once.

   A partner owns them. The TPB suggests getting legal advice on your letters, even if you start from a professional body’s template.

2. 02

   Write one schedule per service.

   Company accounts and return, trust accounts and return, individual return, BAS, payroll. Each states what’s included, what isn’t and the information needed.

3. 03

   Map each client group before you send.

   List the entities, who signs for each one and who pays. Our client onboarding checklist puts this before any work starts.

4. 04

   Send for signature before the work starts.

   If work has to start first, confirm in writing that the letter’s terms cover it once signed.

5. 05

   File the signed copy with the client.

   Record the date it was signed and the terms version, so a reviewer can match them.

6. 06

   Diary the review.

   Review recurring letters each year, and reissue when the scope, fees, ownership or law change.

Audit engagement letters: what ASA 210 requires

An audit doesn’t follow the APES 305 outline. In Australia the terms of an audit are set by ASA 210 Agreeing the Terms of Audit Engagements, and APES 305 says complying with ASA 210 should also meet APES 305. The template above says plainly that the work isn’t an audit, so an audit for the same client needs a letter of its own.

Before you accept, paragraph 6 asks you to establish the preconditions for an audit. The financial reporting framework has to be acceptable, and management has to agree that it acknowledges and understands its responsibilities. Those are preparing the financial report under that framework, the internal control needed to keep it free from material misstatement, and giving you access to the information and people you need. If the preconditions aren’t there, paragraph 8 says not to accept the engagement unless law or regulation requires you to.

Paragraph 10 then requires the agreed terms to be recorded in an audit engagement letter or another suitable written agreement, and to include:

• The objective and scope of the audit of the financial report.
• The auditor’s responsibilities.
• Management’s responsibilities.
• The applicable financial reporting framework.
• The expected form and content of the auditor’s reports, with a statement that a report may differ from that in some circumstances.

The application material (A24) lists what an audit letter may also cover. That includes the inherent limitations of an audit, the expectation of written representations, access to information, the draft financial report on a timetable, the basis of fees and billing, and a request for management to acknowledge the letter and agree to its terms.

Where law or regulation sets the terms out in enough detail, paragraph 11 lets the written agreement record only that the law applies and that management acknowledges its responsibilities. The AUASB publishes an example audit engagement letter, for a general purpose financial report under the Corporations Act 2001, with ASA 210 on its standards site.

UK engagement letters: the schedule of services approach

The UK rules are firmer about the letter itself. ACCA’s Code of Ethics and Conduct (section B9, paragraph 5) says a firm must record in writing and send each client a letter of engagement. It must go before any work, or as soon as practicable after the engagement starts. The firm keeps a copy signed by the client.

ICAEW’s Code of Ethics requires the basis of fees in writing, before the engagement starts or as soon as possible after (R330.5). Its bye-laws require you to tell new clients in writing which principal to contact with a complaint, and that they can complain to ICAEW. The CIOT and ATT strongly recommend that members issue engagement letters.

The working party guidance from CIOT, ATT, ACCA and AAT splits the letter into four parts:

• A covering letter naming the client and referring to the schedules and terms.
• Schedules of services, one for each service, each with its scope, the client’s responsibilities and the fee basis. A new service usually means a new schedule and a short covering letter that refers back to the standard terms.
• Standard terms and conditions of business, the same for every client: client identification under the money laundering rules, client money, complaints, confidentiality, data protection, fees, lien, limitation of liability, termination and retention of papers. The current sample terms also include a clause on AI-enabled software.
• The firm’s privacy notice. ACCA says it must go with the engagement letter.

Engagement letters in the US and New Zealand

Common engagement letter mistakes

• One signature “for the group”. A letter Ryan signs for “the Bull group” with no list of entities leaves the trust’s engagement open to argument.
• A scope without exclusions. If the Division 7A schedule or payroll isn’t named either way, the client will assume it’s included.
• Never reissuing. A new director, a new trust or a fee change all point to a new letter under APES 305’s reissue factors.
• Changing terms by website. New terms bind a client once they’ve agreed to them, not once they’re published.
• Starting work unsigned. If the work can’t wait, confirm in writing that the letter’s terms will cover it.
• Rewording the scheme statement. The professional standards scheme statement has prescribed wording. Copy it exactly.

How AccountKit handles engagement letters

AccountKit doesn’t write engagement letters or keep a template library, and it doesn’t run AML or identity checks. Write the letter in your own documents. AccountKit sits alongside Xero and Xero Practice Manager and handles the signing and the record.

• Send. Launch a FuseSign or Annature signing request from AccountKit’s document workflow when the letter is ready.
• Track. Follow each request’s progress on AccountKit’s e-signing dashboard, alongside the client’s other work.
• File. The signed letter is filed back to its original location, and the administrator is notified.
• Repeat. Keep the letter procedure in the Knowledge Centre, and set the yearly review as a recurring job in workflow against the client group.

This guide is general information, not legal or professional advice for a particular firm. Check the current standard, your professional body’s rules and your insurer’s requirements before you rely on any wording here.