Atlanta CPA Teaches America's Entrepreneurs on Understanding an Engagement Letter from your CPA
Working with a CPA should not be difficult. Though much of the work a CPA might do is very difficult and technically challenging, engaging a CPA to work with you should not be. Whether you retain a CPA to critique your internal financial statements, preparation of corporate income taxes, IRS representation or an Offer in Compromise be sure to work with a CPA who is willing to provide you with an engagement letter so that you will understand your rights and responsibilities. The below is a sample of an engagement letter that would be shared with a corporate taxpayer for whom which a corporate income tax return is being prepared:
Enclosed you will find the federal and state income tax returns for the company for the year ended 2009. Enclosed I have included instructions with respect to the filing of these tax returns.
This letter is to confirm our understanding of the terms and objectives of our engagement and the nature and limitations of the services I have provided in connection with these compiled financial statements.
I have performed the following services: I have compiled from information you provided the annual financial statements of the company for the above year-end. A compilation is limited to presenting in the form of financial statements information that is the representation of management. I did not review or audit the financial statements and accordingly, do not express an opinion or any other form of assurance on them. The financial statements will not be accompanied by a report.
Based upon our discussions with you, these financial statements have been designed to meet your needs in managing your business. Accordingly, these statements are for management’s use only and are not intended for third-party use.
Material departures from Generally Accepted Accounting Principles (GAAP) exist and the effects of those departures, if any, on the financial statements are not disclosed. In addition, substantially all disclosures and the statement of cash flows required by GAAP have been omitted. Notwithstanding these limitations, you represent that you have knowledge about the nature of the procedures applied and the basis of accounting and assumptions used in the preparation of the financial statements that allows you to place the financial information in the proper context. Further, you represent and agree that the use of the financial statements will be limited to members of management with similar knowledge.
The financial statements are intended solely for the information and use of management and are not intended to be and should not be used by any other party. Should you require financial statements for third party use, we would be pleased to discuss with you the requested level of service. Such engagement would be considered separate and not deemed to be part of the services described in this engagement letter.
This will confirm that you are solely responsible to establish and maintain internal controls, including monitoring ongoing financial activities related to the services. Our engagement cannot be relied upon to disclose errors, fraud, or illegal acts that may exist. However, I will inform the appropriate level of management of any material errors that come to our attention and any fraud or illegal acts that come to our attention, unless clearly inconsequential. In addition, I will report to you any evidence or information that comes to my attention during the performance of our procedures regarding illegal acts that may have occurred, unless they are clearly inconsequential. No such fraudulent or illegal acts came to our attention during the engagement.
In the event of a dispute over our engagement, we mutually agree that any dispute that may arise in connection with our engagement will be submitted to mediation by selecting a third party to help us reach an agreement. We acknowledge that the results of this mediation will not be binding upon either of us. The costs of the mediation will be shared equally by both of us. If I incur legal fees as a result of our reliance on any false representation by you, you agree to reimburse us for all of our legal fees and related costs of defense. In view of the limitations described above, you agree not to take, or assist in, any action seeking to hold us liable for damages due to any deficiency in the financial statements I prepare and you agree to hold us harmless from any liability and related legal costs arising from any third-party use of the financial statements in contravention of the terms of this agreement.
This will confirm that all of my work will be done at our standard hourly rate of $195 per hour, that invoices are due upon receipt, that finance charges at the rate of two percent per month and collection costs are due on all unpaid monies, and that you personally guarantee payment of all invoices, and that you acknowledge that both you and your business/corporation are both jointly and severally liable for all billings. If the foregoing is not in accordance with your understanding, please notify me in writing within five days of this letter.
Sincerely, John C. Dillard, C.P.A., President
"Dare to Attempt Something so Great for the Kingdom of God, that it is Doomed to Failure Lest God be in it!"
John Dillard, CPA of His CPA, PC (An Atlanta Christian CPA firm) 1940 Woods River Lane, Duluth, GA 30097 Phone 770-814-9304 http://www.hiscpa.com/ (All Rights Reserved) To retain John Dillard CPA (An Atlanta Christian Speaker/Author) for your business group or church congregation, you can contact him today at 770.814.9304. To discover John Dillard's Published Books and their vision visit http://www.john-dillard.com/