New CPA Firm Legal Considerations
Hiring an attorney to assure compliance with all local, county, and state requirements and to handle the formal establishment of your business as a legal entity is advisable before opening your practice.
Further, you’ll want to utilize engagement letters developed in accordance with applicable AICPA Professional Standards and best practice recommendations to help your practice be as efficient and effective as possible. You’ll want to clearly and thoroughly document the terms of each engagement, and have your client sign-off before beginning the work.
Engagement letters can help prevent misunderstandings and protect you from unforeseen liabilities. Since the primary purpose of an engagement letter is to establish an understanding between the parties, the engagement letter should generally address the following:
  • Establish the parties to the agreement
  • Describe the services to be performed
  • Define the responsibilities of the parties
  • Establish the right to terminate the engagement
  • Place limits on liability or damages
  • Establish the fee arrangement for services
The AICPA Member Insurance Programs offer policyholders complimentary access to a library of Sample Engagement Letters that can be used in everyday practice.
For a quick review of the benefits of using engagement letters, as well as the risks associated with not using them, check out this infographic.

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