Previously, I had returning clients sign an engagement letter every year. However, more recently (2022) I have changed the wording in the letter (see bolded):
For example,
We wish to thank you both for asking that we prepare XXXX’s personal T1 income tax return with respect to her sole proprietorship and XXXX’s personal T1 income tax return, for the 202X taxation year and subsequent tax years.
Generally, I don’t get a current client to sign a new letter unless there is a change of address, last name change (due to marriage), etc.
To be clear, all new clients must sign an engagement letter.
Is this how others are treating engagement letters?
For review engagements and compilations, CPANS gives “guidance” on how often new letters are required. Certainly if there’s been a change in corporate structure, shareholders, senior staff, I’d get a new one for reviews. For compilations, I would scan the last letter and carry it forward every year. Any changes, as listed previously would result in a new letter. Or, for an unincorporated business with significant changes, I’d get a new letter. But lately, CPANS gives suggestions which I may as well follow and avoid losing points on my next practice inspection. Some accountants get a new letter every year, but I can’t imaging anyone acting through it page by page with the client. A compilation letter is now 5 pages long plus an appendix which is the compilation engagement report you intend to issue. I still remember the old days when the CICA Handbook was in a single 5.5” x 8” binder. Tax returns were printed on a dot matrix printer using 3-part 3-colour paper. Everyone had a list of contacts and direct phone numbers at their nearest district office. If I needed help with a given topic, I knew who to call to get an answer. If CRA wanted to review something, he’d come to your office, you’d hash it out, and questions were resolved before he left. That afternoon his supervisor had approved it and sent a letter to the client and accountant.
For T1 clients, I have all new clients sign an engagement letter, authrep and provide copies of government id. The engagement letter has a perpetuity clause:
“The services and terms as set out above are as agreed. I, XXXX, acknowledge and accept my responsibilities as the taxpayer as outlined above. This agreement shall continue in perpetuity unless and until otherwise modified in writing and signed by all parties.”
I only update every 5 years or so. Some of my regulars that I know well I haven’t updated at all. Perhaps I should consider updating more often.
We switched from perpetual to annual 12 years ago and I am never going back.
There have been more than one occasion in those years where I learned things about a client that made me not want to associate myself or my firm with in the future and sending a “our engagement is over and will not be renewed next year” letter is very easy.
Could have been changes to CSRS4200, but the last time I checked, an annual engagement letter was not required. I think this was in the Practitioner’s Toolkit.
For T1 clients I send the engagement letter along with the T183 at the same time for e-signature. Most of my clients e-sign the documents and this just makes it quick and easy.
We get engagement letters signed every year for both T1 prep and corporate year-end prep. For bookkeeping, we get the client to sign an engagement letter when they hire us, but we include language in the letter stating that it will remain in effect indefinitely, unless either party requests changes (so, no new letter every year).
I am wondering why there is no “limitation of liability” clause to the engagement letter. @Elizabeth Has this been considered and it it possible to add one?