Scope is the first thing to pin down
Accounting services range from bookkeeping and payroll to tax preparation, compiled or reviewed financial statements, and audits, and each carries different responsibilities and professional standards. An accounting agreement should say which service is being provided, for which periods and entities, and what is excluded. Disputes often arise when a client assumed the accountant was checking for errors or fraud while the engagement only called for preparing statements from information the client supplied. If lenders, investors, or a buyer will rely on the financial statements, that use should be reflected in the engagement, because a higher level of service may be needed. Audits also bring independence rules that limit what other services the same firm can provide.
Records, responsibility, and liability terms
Most engagement letters place responsibility for the accuracy of the books and for internal controls on the client, and many ask management to acknowledge that in writing. Liability caps, waivers of certain damages, indemnities, and clauses requiring arbitration or mediation are common and should be read before signing rather than after a problem. The agreement should also address who keeps which records: documents you provide are generally yours, while the accountant's workpapers may be treated differently. Confidentiality and data security deserve attention when the firm will hold tax and payroll data. Keep in mind that communications with an accountant are often not protected the way communications with a lawyer can be, which matters if a tax or legal dispute is possible.
Before you sign, or when something goes wrong
We can review a proposed accounting agreement before it is signed, or look at an existing one once a dispute has started, whether over fees, a missed filing, or an error in statements that someone relied on. Either way, the questions are what the engagement actually promised, what each side was responsible for, and what the contract says about limits and dispute procedures. Bring the engagement letter, any amendments, invoices, and correspondence about the work. If the dispute involves an error, the time to raise a claim can run out sooner than people expect, so it is better not to wait while the relationship winds down.
