Engagement letter changes
EU legislation has resulted in some changes being needed to ACCA Terms and Conditions for engagements between ACCA members and their clients.
The Service Directive 2006/123/EC of 12 December 2006 (on services in the internal market) had to be fully implemented by the Member States by 28 December 2009.
The UK has implemented this with Statutory Instrument 2009/2999, which can be found on the Office of Public Sector Information website
The legislation sets out the duties of service providers, including what information has to be made available. Sections 7 and 8 of the instrument set these details out. Most of them are obvious, and would already be included anyway in any standard letter of engagement.
Please ensure that you update factsheet 144 Tax Engagement Letters, factsheet 163 Audit Exempt Company Accountants Reports and the ACCA Letters of Engagement for these changes.
The additional information required relates to professional indemnity insurance, authorisation and registration.
The last item in the SI section 8(1) lists the information the provider of a service must make available to a recipient of the service, it reads: "where the provider is subject to a requirement to hold any professional liability insurance or guarantee, information about the insurance or guarantee and in particular- (i) the contact details of the insurer or guarantor, and (ii) the territorial coverage of the insurance or guarantee."
The legislation also requires that the service provider supplies "where the provider is registered in a trade or other similar public register, the name of the register and the provider's registration number or equivalent means of identification in that register." This would relate primarily to registered auditors. Certain details relating to authorisation by the "relevant competent authority", in this case ACCA, are also required.
The legislation allows different ways for the information to be made available, section 8(2) stating: "For the purposes of paragraph (1), information is made available to the recipient if-
(a) it is supplied by the provider to the recipient on the provider's own initiative,
(b) it is easily accessible to the recipient at the place where the service is provided or the contract for the service is concluded,
(c) it is easily accessible to the recipient electronically by means of an address supplied by the provider, or
(d) it appears in any information document supplied to the recipient by the provider in which the provider gives a detailed description of the service."
Locktons, the professional indemnity insurance provider recommended by ACCA have suggested that their own requirements and those of the new legislation are met if the engagement letter includes a paragraph stating where the information can be found. ACCA would recommend that clause 24 of the Terms and Conditions letter should now read:
"24 Professional Indemnity Insurance
24.1 In accordance with our professional body rules we are required to hold professional indemnity insurance. Details about the insurer and coverage can be found at [www.xxxx.com] or at our offices"
ACCA recommends that the terms and conditions letter also includes as clause 25 (registered auditors will need to include 25.2):
"25 Authorisation and Registration
25.1 [insert your firm's name] are registered with ACCA as chartered certified accountants and can be found on the register of members at http://www.accaglobal.com/general/finding/
25.2 We are registered as auditors by the Association of Chartered Certified Accountants in the UK and details of our registration can be found at www.auditregister.org.uk under registration number [XXX] or at http://www.accaglobal.com/general/finding/."
The existing clause 24 Reliance on Advice will become clause 26, and so on.