Many accountant professional liability claims allege negligence or errors the accountant made in the course of his or her services. Whether you are signing a new client or updating the services offered to a long-time loyal client, it is important to have an up-to-date engagement letter detailing the services you and the client agree you will provide. An engagement letter is an agreement the client must sign to indicate that you are on the same page when it comes to what is expected of your services. It is a good defense against any accusations made against you.
Accountants often get in trouble, however, when they provide services before asking clients to sign engagement letters. It is usually an oversight. For example, you may have been hired to complete an audit of a company’s books, and while you’re doing that, the client asks if you can prepare taxes for them as well. Always take time to update the engagement letter with every service you provide.
Your accountant professional liability coverage may pay for legal fees and settlements that are awarded to disgruntled clients, but a solid engagement letter that outlines every service you agreed to supply can help minimize settlements. You need the protection of both to make sure your firm is adequately covered.