Accountant engagement letters: what the scope should say before you sign
The clauses an Australian small business should check in an accountant's engagement letter, including scope, exclusions, fees, responsibilities, deadlines, data ownership and ending the engagement.
An engagement letter is the contract that decides what your accounting fee covers. Before signing, check that it lists every entity and return, states what is excluded and how extra work is charged, sets out who is responsible for what (including the accuracy of your records), records deadlines and how you will be told about them, and explains who owns your data and how the engagement ends. If a quote is not backed by a letter with these points, you cannot hold the firm to the price, and the firm cannot hold you to the scope either.
This guide is part of the checklist for choosing an accountant.
Why engagement letters matter
Accountants who are members of professional bodies are generally expected to document the terms of an engagement, and registered tax agents must act in line with the Code of Professional Conduct in the Tax Agent Services Act 2009, which includes acting competently, honestly and in the client's best interests, and taking reasonable care to ensure tax laws are applied correctly. The letter is where those duties become concrete for your business. It is also your best evidence in any later dispute about fees.
The clauses to check
| Clause | What good looks like | Warning sign |
|---|---|---|
| Parties | Every entity named: company, trust, trustee company, individuals | Only "the client" |
| Scope | Each return, statement, BAS and service listed by year | "Accounting and tax services" |
| Exclusions | ATO reviews, audits, amendments, restructures, new entities listed as excluded or separately priced | Silent on exclusions |
| Fees | Fixed fee per item, or hourly rates by staff level, plus GST | "Fees as determined" |
| Extra work | Quote before starting, or hourly with notification above a set amount | Billed without notice |
| Your responsibilities | Provide complete records by an agreed date; tell the firm about changes | Nothing stated, then disputes over delays |
| Firm's responsibilities | Lodge by agreed dates; tell you of deadlines and ATO correspondence | No mention of deadlines |
| Assumptions | Condition of records the price assumes | None, so any extra time is chargeable |
| Software and data | Who owns the subscription and how data is returned | Firm owns everything |
| Confidentiality and privacy | How information is stored and shared | Missing |
| Anti-money-laundering identification | Explains identity checks the firm must make for regulated services | Unexplained requests for documents |
| Ending the engagement | Notice period, final invoice, handover of records | Fees for "transfer" with no detail |
| Complaints | Who to contact; reference to TPB or professional body | Missing |
Scope: make it a list
Write the scope as a list you could tick off:
- 2026–27 financial statements for Example Trading Pty Ltd
- 2026–27 company income tax return
- Four quarterly BAS for Example Trading Pty Ltd
- STP finalisation review for 2026–27
- 2026–27 trust return and trustee resolution for the Example Family Trust
- Two individual returns
- ASIC annual review handling for two companies
Use your own names and years. This is the same list you sent for quotes, so the letter should match it. The company and trust worked example shows a full group scope.
Fees and extra work
Ask for the fee per item where possible. For extra work, the most useful clause says the firm will give a quote or estimate before starting anything outside scope above a set amount, for example $300. That single clause prevents most invoice surprises. The differences between pricing models are covered in fixed fee vs hourly.
Responsibilities and deadlines
You remain legally responsible for your tax obligations, even when an agent lodges for you. The letter should therefore say:
- When you must provide records for each job, so the firm can meet the due date.
- How the firm will tell you of upcoming lodgement and payment dates.
- What happens if you provide records late.
Registered agents can access lodgement program dates that may be later than self-lodgement dates, but only if they lodge on the program's schedule. If you are late with records, the firm may not be able to protect you from penalties; see ATO penalties and interest.
Data ownership and leaving
- The business should own its accounting software subscription and its data where practical.
- The letter should say what records you get back when the engagement ends, in what format and within what time.
- Check whether the firm charges to transfer records, and how much.
The switching accountants guide explains the handover process.
Liability limitation
Some engagement letters refer to a professional standards scheme that limits the firm's liability. Such schemes are approved under state and territory professional standards legislation and apply to members of participating professional bodies. A limitation is lawful under an approved scheme, but read it: it affects how much you could recover if a serious error occurred.
Unfair terms
Most engagement letters are standard form contracts. If your business is a small business under the Australian Consumer Law's unfair contract terms rules, a term that is unfair (for example, letting the firm change fees or scope unilaterally without good reason) may be void, and since November 2023 penalties can apply to businesses that use such terms.
Frequently asked questions
Do I need a new engagement letter every year?
Many firms issue one each year or when the scope changes. If your business adds an entity or employees, ask for an updated letter.
Can I change the scope after signing?
Yes, by agreement. Put the change in writing with the new fee.
What if the firm does work outside the scope without asking?
Raise it with the firm first, referring to the letter. If it is not resolved, see the complaints guide.
Is an email quote enough?
It is better than nothing, but a signed letter with the scope and terms gives both sides certainty.
Sources and where to check
- Tax Practitioners Board — Code of Professional Conduct guidance for registered agents
- Australian Competition and Consumer Commission — unfair contract terms in small business contracts
- Professional Standards Councils — professional standards schemes and liability limitation
- AUSTRAC — customer identification obligations for regulated professional services
