Tip of the month engagement letter do's and don'ts.

• Position: CAMICO Insurance

Engagement letters help improve communication with clients, document engagements and protect you from litigation. By clearly defining an engagement's scope and services, you can better avoid misunderstandings.

What you should do:

* State the purpose of the engagement;

* Define the scope of the engagement (specifically what you will and won't do);

* Specify known negative conditions or adverse situations;

* Note client instructions, responsibilities, deliverables and dates;

* Note reliance on facts provided by client;

* Outline terms of fee collections and the consequences of late payment;

* Include a stop-work clause;

* Indicate your record retention policy;

* Include third-party service provider language, if applicable; and

* Confirm client's acknowledgment to the terms of the engagement and request client's signature.

Additional areas to consider:

* Include warnings regarding inadequate internal controls;

* Explain limitations regarding financial statement distribution;

* Include alternative dispute resolution language (i.e., mediation for all disputes and...