November 2002

CPA'S Guide to Effective Engagement Letters, Fourth Edition

By Ron Klein, Ric Rosario, and Suzanne M. Holl
Aspen Law & Business, May 2002, $102,
ISBN: 0-7355-3267-2
Reviewed by Henry J. Krostich

The subtitle of this book, “Implementing Successful Loss Prevention Practices,” provides a hint to its underlying purpose. The authors, all employees of Camico Services, Inc., a subsidiary of Camico Mutual Insurance Company and the professional liability insurance carrier recommended by the NYSSCPA, clearly acknowledge the assistance of the company and its insureds in creating the book.

That said, the book is a wonderful compilation of the various components (supplemented by completed samples) of engagement letters that can, and should, be used by practicing CPAs for a wide range of engagements. The book is divided into chapters by service area, including accounting and auditing, tax preparation, representation and planning, bookkeeping services, consulting, and business valuation. I found it difficult to think of an engagement that a small to medium-sized practitioner would encounter that this volume does not address in some way. The accompanying CD-ROM contains copies of all the sample letters. There is even an appendix devoted to disengaging that concentrates on why, when, and how to accomplish it without becoming more entwined. As expected, legal counsel is advised as necessary.

The book adequately covers the areas that a practitioner needs to consider when constructing an engagement letter. Each chapter begins with suggested wording for an engagement letter displayed side by side with comments on how and when to use particular language. I would have preferred to see the suggested wording grouped into required elements, alternative selections, and optional elements, rather than a simple list. The authors provide little guidance on whether certain wording is dependent on other parts of the letter, or can stand alone. The second part of each chapter contains sample engagement letters for that particular subject area. Unfortunately, the sample letters appear not to have been constructed using the suggested wording supplied in the text.

The authors point out that each engagement letter needs to be created for the specific conditions it addresses. They are quite clear that the sample engagement letters provided at the end of each chapter were not designed as, and should not be used as, a forms book. Yet, that is exactly what many practitioners may be tempted to do. While the authors advise otherwise, they lead the reader to conclude that a boilerplate engagement letter may be better than none at all.

Supporting this conclusion is the CD-ROM, which seems to have been included either as an afterthought or a marketing device. The CD-ROM is divided into folders representing each of the chapters. Each folder contains a generic text file for each sample letter. If these samples were not to be used as forms, there is little reason to provide the reader with the means to cut and paste an entire sample letter.

This book/CD-ROM package would be much more useful and true to the authors’ caveats regarding the use of the sample letters by using the CD-ROM to provide an engagement letter “wizard” that presented selections from the suggested wording, appropriate to each area to be covered by an engagement letter, in assembling a truly customized engagement letter using the supplied text as building blocks.

Despite the book’s shortcomings, it is the only reference material devoted solely to the increasingly important subject of creating accounting engagement letters, and as such it deserves space on every firm’s bookshelf. The user must simply recall the authors’ advice to properly tailor each letter to the specific needs of the engagement.