An overview as to why an accountants in Jamaica need to use engagement letters for all business they undertake and why this is beneficial to them.

1. Accounting in Jamaica
The 411 on Engagement Letters
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2. What is an Engagement
Letter?
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3. The Engagement Letter
❖ This is an important contract that must be established at
the beginning of any Accounting transaction.
❖ This is often overlooked by accountants.
❖ Without this document there is a greater risk of an
accountant being sued for malpractice as there is no legal
document setting forward the responsibilities of all parties
and guidelines to be followed throughout the service period.
❖ In general accountants need this document for any legal
predicament that might arise.
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4. The Engagement Letter
❖ The engagement letter must always specify the scope of
services to be rendered.
❖ If the service provided changes even in the slightest way, the
engagement letter should be amended and the amended
version signed by both parties.
❖ An engagement letter should be prepared immediately
following the first meeting with a client and a new letter
should be authorised by both parties for each retainer.
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5. It’s Not the Representation
Letter
❖ The engagement letter should not be confused with the
representation letter.
❖ The engagement letter is the guiding document by which
the service relationship is defined.
❖ The representation letter is a recitation of the
representations made by the respective parties to each
other.
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6. Why is the Engagement
Letter Important?
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7. Engagement Letter:
Why is it important?
❖ Protection - If an accountant has to face the Institute of
Chartered Accountants in Jamaica (ICAJ), the Public
Accountancy Board (PAB) and then court, for their own
protection they need their engagement letter. This document is
proof there was no misunderstandings of client expectation and
the services rendered.
❖ Compliance with International Standards on Auditing (ISA) 210
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8. Engagement Letter:
Why is it important?
❖ Compliance with the Proceeds of Crimes Act (POCA) for client
identification - in case you commence doing business with an
entity that comes under the scrutiny of the Government’s fraud
entities you want your documentation to be immaculate.
❖ Compliance with ICAJ’s requirement to carry Professional
Indemnity Insurance(PII) adopted in 7/2012 Annual General
Meeting. PII ensures that any claim brought against an ICAJ
and ACCA practicing member are capable of being successfully
fought and recovered.
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9. What is in an
Engagement Letter?
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10. What to include in the
Engagement Letter
❖ Professional Services - the type of professional accounting
services you will be providing to the client.
❖ Client Obligations - all the responsibilities of the client with
respect to the engagement. For example - providing all the
information and documentation you will need to complete
your duties.
❖ Accountant Responsibilities- All actions required by the
accountant, this is directly related to the terms of the
engagement.
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11. What to include in the
Engagement Letter
❖ Timeline of the Service Period- Specify the time when the
engagement begins and times for the completion for each
obligation.
❖ Billing Procedures- This must never be omitted. You may be
tempted to leave out this information but it is essential for the
client to have this information and will help you in the case payment
issues arise. In this section you can include frequency of billing,
collection, interests on overdue accounts etc.
❖ Termination Procedures - Terms and conditions for each parties
withdrawal from he contract must be stipulated within the
engagement letter.
❖ Limitation of Liability
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12. What to include in the
Engagement Letter
❖ Engagement Limitations- A section of the letter needs to
cover the limitations of the services you will be providing,
e.g. the accountant is not responsible for detecting fraud or
that the accountant is not performing an audit.
❖ Confidentiality Clause- To protect your work, provisions
must be made in the engagement letter that stipulates how
a client can use the work you have produced for them, so
that it isn’t plagiarized or wrongly distributed.
❖ Report Type- The type of report required from the
accountant by the client should also be specified with the
engagement letter, e.g. Audited Financial Statements.
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13. What to include in the
Engagement Letter
❖ Modes of Communication- This outlines all official means
of communication between client and accountant, i.e.
telephone, emails, letters, fax etc.
❖ Litigation Protection Clause- Sometimes an engagement
letter will also cover the methods of litigation for dispute
resolution.
❖ Confirmation- This section must be signed by all parties to
show that all the terms, conditions and stipulations are
agreed to.
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14. Please Note
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15. Engagement Letter for Tax
Work
❖ It is highly recommended that all practitioners should issue
a letter of engagement for any tax work.
❖ When the accountant is acting as an agent for a client (for
tax returns) or as a principal (expenditure account prepared
for a sole trader) or for consultancy work, these distinctions
must be made in the Engagement Letter.
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16. Engagement Letter for Tax
Work
❖ Separate Engagement Letters should be issued for each client that a
service is provided for. E.g. Separate Engagement letters should be
issued if you are providing tax services for:
• A husband and wife
• An individual and, following death, the personal representatives
administering the deceased’s estate
• A company and its shareholders
• A company and its directors
• ATrust and its Beneficiaries
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17. Now you know.
Good luck writing your
Engagement Letters.
See an example of an Accounting Engagement Letter.
You can find out more about Accounting in Jamaica at
headofficeapp.com
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