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Engagement letter should include:
- Objectives of the engagement
- Services to be performed
- CPA's responsibilities
- Client's acceptance of its responsibilities
- Any limitations of the engagement
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If you fail to do an engagement letter...
Independence is not impaired, but in violation of Rule 202.
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Things you cannot do when performing non-attest services:
- Authorizing a transaction in your client's absence or without authority to do so
- Preparing any source documents
- Having custody of client assets
- Supervising client employees
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Bookkeeping services that would not impair independence
- Recording transactions that management has determined the appropriate classifications
- Preparing financial statements based on the trial balance
- Posting client approved entries to the trial balance
- Proposing standard, adjusting, or correcting journal entries (as long as the client reviews the entries and understands them)
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Bookkeeping services that would impair independence
- Determining/changing journal entries, accounting codes, or classifications without client approval
- Authorizing/approving transactions
- Preparing source documents
- Making unapproved changes to source documents
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For everyone, independence is impaired if...
- Have a fianncial interest exceeding 5% of the entity's outstanding securities
- Is a director, officer, or employee of the client
- Is a promoter, underwriter, or voting trustee of the client
- Is a trustee to any pension or profit-sharing trust of the client
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