We will be focusing on the difference between Audit Assistance and Audit Representation in the next series of blogs. Is there a difference? Where is the line? Do all taxpayers need actual representation? Does IRS Cir. 230 require representation as opposed to assistance? How does the newly upheld Loving ruling change the playing field?
We will explore and answer these questions and more. We will also review the need for a specific engagement letter for specific situations, how these decisions can affect your E&O coverage, and how they can affect the future of your practice.
We will start with the basics of any client contact, no matter the topic of conversation. Engagement letters will be a prominent feature throughout this course. As the title implies, the engagement letter should be a first line of contact for any client before any professional relationship is established. Engagement letters are also your first line of defense in the case of problems, civil or otherwise between you and your client.
The engagement letter should do several things that cover everyone involved including:
1. Outline the specific scope of your services
2. Identify all parties involved, including any third parties
3. Spell out confidentiality, privilege, and disclosure items that may be involved
4. Set and clarify time lines
5. Disclose all fees, charges and billing practices
6. Specify services not provided under the scope of the engagement
7. Include mediation language
8. Outline methods of disengaging from the relationship on both sides
9. State issues or rules that could affect the engagement
As you can see, the engagement letter is not a “one size fits all” document, nor should you try to craft one that does that. Take the time to gather a group of templates that cover most of your conceivable situations. Then customize the particulars of each engagement letter for each situation.
Most of the E&O insurance carriers provide sample letter on their websites for free to help with this process. All of the E&O carriers that provide any type of true protection for your business also require engagement letters.
For example, North American Professional Liability Insurance Agency (NAPLIA.com) has a huge library of engagement letters and other items free on their site under the resources tab. I have included several of them in the appendix for your reference. I have also included differing types of engagement letters from other sources. All are free source or used with the permission of the author.