Engagement Letter
Definition
A written contract between the forensic accountant and the retaining party that defines the scope, deliverables, fee arrangement, confidentiality terms, and the identity of the client. It is the primary document that governs the relationship.
- Function
- Written contract governing the forensic accounting relationship
- Defines
- Scope, deliverables, fee arrangement, confidentiality terms
- Also defines
- Identity of the client, i.e. who the accountant reports to
- Timing
- Executed before substantive engagement work begins
Common questions
Why does the letter need to name the client explicitly, not just the retaining party?+
In litigation and fraud engagements the party paying the fee, for example an attorney or insurer, is not always the party the accountant's duty of care and privilege run to, so naming the client clearly avoids later disputes over who owns the work product and who it can be disclosed to.
What happens if the scope of work changes after the engagement letter is signed?+
A material change in scope, such as extending the analysis to a new time period or additional entities, normally requires a written amendment or supplemental letter, since undocumented scope creep can undermine the engagement's defensibility if the work product is later challenged.
Related terms
- Attorney-Client Privilege
- A legal protection shielding confidential communications between an attorney and their client from compelled disclosure in litigation. A forensic accountant retained by...
- Independence
- The requirement that an expert's opinion is formed solely on the evidence and the expert's own professional judgment, free from pressure from...
- Litigation Hold
- A formal instruction suspending the routine destruction of documents, electronic records, and other potentially relevant material. Failure to issue one promptly when...
- Scope Creep
- The unintended expansion of a penetration test beyond the agreed boundaries, either because testers follow a vulnerability chain into an out-of-scope system...
- Work-Product Doctrine
- A rule protecting materials prepared by or for an attorney in anticipation of litigation. It is broader than attorney-client privilege and covers...