Engagement Letters for Canadian Accounting Firms: What the Conduct Rules Require

The professional-conduct baseline

Each province's CPA body maintains its own code of professional conduct, and the requirement to document engagement terms in writing appears across them. Because rule numbering and wording differ by province, cite your own provincial code rather than a rule number borrowed from elsewhere.

The eight clauses that do the work

Most engagement letters are long and only a few paragraphs matter. These are the ones that get relied on.

• Scope — what is included, stated as a list
• Exclusions — what is not included, stated explicitly
• Client responsibilities — records, accuracy, timeliness
• Firm responsibilities — what the firm will and will not verify
• Fees and payment terms, including how out-of-scope work is priced
• Limitation of liability, drafted to your province's requirements
• Confidentiality and use of client information
• Termination — how either party ends the engagement, and what happens to records

Scope creep and why the letter is your only defence

Scope creep is rarely a single large request; it is thirty small ones. Without a written scope, each request is negotiated on its merits and the answer is always yes. With one, the conversation becomes 'that sits outside the letter — shall I price it?', which is a different and much easier conversation.

Annual renewal versus evergreen letters

Evergreen letters are convenient and go stale. Annual renewal, priced from the current services list, resets both the scope and the fee without a difficult conversation — the increase arrives as a document, not as an argument.

Getting letters signed: paper versus e-signature

The letters that never come back are the ones that require printing. Electronic signature is broadly recognized in Canada under federal and provincial electronic-commerce legislation; the practical requirement is a signing experience that does not ask the client to create an account.

What to keep on file, and for how long

The signed letter, dated, on the client record — not in an email folder. Business records generally must be kept six years from the end of the last tax year they relate to, and a practice inspection will ask for the letter that governed the work under review.