Standards & Compliance

Engagement letters designed around AICPA guidelines and Circular 230.

EngageDraft generates engagement letters structured around AICPA guidelines and federal practitioner standards. Here is what EngageDraft letters are designed to cover.

New to engagement letters? Read the CPA engagement letter guide for a plain-language overview of what every letter should include and why it matters.

Standards followed

EngageDraft engagement letters are designed to align with the following professional standards:

AICPA Engagement Letter Guidelines IRS Circular 230 §10.33–10.34 IRC §7216 AICPA SSTS

The AICPA publishes sample engagement letter templates annually for each tax service type. EngageDraft's letter structure and required sections are modeled on those templates. Circular 230 §10.33 establishes best practices for communicating scope and fees; §10.34 governs tax position standards. IRC §7216 governs disclosure of tax return information and is cited by name in the standard confidentiality clause.

What letters are designed to include

EngageDraft's standard letter templates are designed to include the following sections, depending on the engagement type and information entered by the user. Users should review each generated letter before sending it to confirm the content is complete, accurate, and appropriate.

  • Introduction and scope — confirms the purpose, lists specific services covered, and states what will be delivered and how.
  • Exclusions — explicitly states what is not covered by the engagement, per service type.
  • Client responsibilities — client must provide complete and accurate information and is responsible for accuracy of all data provided.
  • Tax position standards — per Circular 230 §10.34, language is designed to address the preparer's obligations regarding tax positions and the substantial authority standard under IRC §6662.
  • Fees and payment terms — states the agreed fee, payment terms, and confirms fees are not contingent on the results of the engagement.
  • Confidentiality (IRC §7216) — standard confidentiality language is designed to address IRC §7216 and applicable confidentiality obligations.
  • Limitation of liability — firm liability is capped to fees paid. Consequential and indirect damages are excluded.
  • Dispute resolution — disputes go to mediation before litigation.
  • Termination — either party may terminate with written notice. Fees for completed work are due. Documents are returned upon receipt of payment.
  • Record retention — the firm retains engagement documentation for seven years.
  • Signing acknowledgment — client signature constitutes agreement to all terms.

By service type

For individual tax engagements (Form 1040), letters are designed to include, where applicable:

  • Foreign account disclosure — client is notified of FBAR and Form 8938 obligations. Failure to disclose foreign accounts can result in substantial civil and criminal penalties under the Bank Secrecy Act.

For each service type, the scope section covers:

  • Individual Income Tax Return — federal Form 1040 and applicable state returns, what is included, filing responsibility, and exclusions (audit representation, amended returns, tax planning).
  • Business Income Tax Return — Form 1120-S (S-Corps) or Form 1120 (C-Corps), with exclusions for payroll, sales tax, and financial statements.
  • Partnership Income Tax Return — Form 1065, with exclusion of individual partner returns.
  • Estate / Trust Income Tax Return — Form 1041, with exclusion of individual beneficiary returns.
  • Gift Tax Return — Form 709, with exclusion of estate planning advice.
  • State Income Tax Returns — all applicable state returns implied by the client situation.
  • Tax Planning and Consultation — advisory services as of the engagement date; advice limited to the specific question presented; no responsibility for law changes after advice is rendered.
  • IRS / State Representation — representation limited to the matters described in scope notes.
  • Bookkeeping Services — monthly transaction categorization, reconciliation, P&L and balance sheet. Excludes tax preparation, payroll, accounts payable, and CFO advisory.

Limitations

EngageDraft is a productivity tool, not a law firm. Letters are AI-generated based on the information you provide. They are not a substitute for legal advice and have not been reviewed or certified by the AICPA or any licensing body. You should review every letter before sending and apply your professional judgment for any state-specific requirements, licensing body obligations, or client circumstances not captured in the intake form. If your state CPA society has engagement letter requirements that differ from AICPA guidelines, those requirements take precedence.

How to review before sending

Before sending any letter, users should check:

  • Scope accuracy — confirm the services listed match exactly what you agreed with the client. Remove any services that are not part of this engagement.
  • Fee and payment terms — verify the fee amount and due date are correct.
  • Client name and email — confirm the client name in the salutation and the send-to email address are correct.
  • Exclusions — read the exclusion language for each service. If a client might reasonably expect a service that is excluded, address it explicitly.
  • State-specific requirements — some states have additional engagement letter requirements for licensed CPAs. Consult your state CPA society if unsure.