Consulting engagement letter: scope, deliverables and who owns the result
By Arthur Teboul, DokuTrak · Published
In brief
A consulting engagement letter states the business problem, the workstreams and deliverables in scope, the client inputs and dates the plan depends on, and how changes are priced. It also says the client keeps every management call and who owns the final deliverables once they are paid for.
The template: Consulting engagement letter
Fill Schedule A with the workstreams and Schedule B with the milestones, then attach the change order form. Delete the independence clause unless you are a CPA firm that also audits or reviews the client. Have your lawyer review the template once.
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Fill it in online: The engagement letter generator fills this template with your firm and client, keeps the optional clauses you pick, and gives you the letter to copy, print or save.
[Consulting firm name] [Firm address] [Date] [Client legal name] Attention: [Sponsor name], [Title] [Client address] Re: [Project name]
Dear [Sponsor name],
Background and objective
[Client legal name] has asked [Consulting firm name] to help with [the business problem, in two or three sentences]. The project will be successful if [measurable outcome].
Contacts
Your sponsor is [sponsor name] and your day-to-day contact is [contact name]. Our engagement lead is [lead name]. Each of us may change these people by written notice.
Scope
We will carry out the workstreams, activities and deliverables in Schedule A. The following are not included: [implementation, system configuration, hiring, legal or tax advice, other exclusions].
Your role and choices
We advise; you choose. You keep all management responsibilities, including which recommendations to adopt, and you are responsible for carrying them out and for the results.
Independence(optional)
Because our firm also provides [audit / review] services to you, we will not take on any management responsibility. You will name [overseer name] to oversee our work, evaluate it and accept responsibility for its results.
Assumptions and inputs
Our timeline and fees assume that: your staff will give [number] hours a week to the project; you will provide the data extracts, process documents, contracts and prior reports listed in Schedule A by the dates shown; and you will give feedback on each deliverable within the acceptance period.
Milestones and acceptance
We will deliver each item on the dates in Schedule B. You will have [number] business days after delivery to send written comments. If we receive none, the deliverable is accepted. We will revise once for comments that fall within scope.
Change orders
Any change to the scope, timeline or fees needs a change order signed by both of us, in the form attached. We will estimate the effect on time and fees before any added work starts.
Communication
We will tell you promptly of significant findings, of any serious doubt we have about the scope or the expected benefits of the project, and of any conflict of interest that may arise.
Fees and expenses
Option A: a fixed fee of [amount], invoiced by milestone as shown in Schedule B. Option B: [rate] per hour, capped at [amount] without a change order. Expenses agreed in advance are billed at cost, up to [amount]. Invoices are due within [number] days.
Ownership
Once you have paid for a deliverable, we assign to you all rights in the final version of it. We keep our pre-existing tools, methods and know-how, and grant you a non-exclusive license to use any of them included in the deliverables for your internal purposes.
Confidentiality and data
We will use your information only for this project, share it only with staff who need it, and receive files through [secure upload method]. At the end of the project we will return or destroy your data, except copies we must keep by law or professional standards.
Limitation of liability(optional)
Our total liability under this letter will not exceed the fees you paid for the project. Neither of us is liable for indirect or consequential damages.
Indemnity(optional)
You will indemnify us against third-party claims that arise from your use of our deliverables outside the purpose stated in this letter, or from information you gave us that was false or incomplete. [CPA firm with an attest client: limit this clause to knowing misrepresentations by management, the case the AICPA code accepts.]
Non-solicitation(optional)
During the project and for [number] months after it ends, neither of us will solicit for employment any employee of the other who worked on the project, unless the other agrees in writing. General job ads are not solicitation.
Governing law and disputes(optional)
This letter is governed by the laws of [state]. Any dispute about our services will first go to non-binding mediation in [city, state] before either of us starts other proceedings.
Ending the project
Either of us may end this engagement with [number] days’ written notice. You will pay for work done and expenses incurred to that date, and we will hand over work in progress.
Signatures
Please sign below to accept this letter and its schedules. We will start on [start date] or on the date we receive your signed copy, if later.
Best wishes, [Engagement lead name], [Title] [Consulting firm name] Signature: ____________________ Date: __________ Accepted for [Client legal name]: [Sponsor name], [Title] Signature: ____________________ Date: __________ Attachments: Schedule A (scope), Schedule B (milestones and fees), change order form
Engagement letter, consulting agreement or statement of work
These are often the same terms in different packaging. A large client may sign a master consulting agreement once, then a statement of work for each project. A smaller client may sign one engagement letter that holds both. Either way, the scope, the duties and the limits must be written down somewhere both sides signed.
For CPA firms, the AICPA consulting standard asks you to agree with the client, orally or in writing, on the responsibilities of each party and the nature, scope and limits of the services (AICPA Statement on Standards for Consulting Services No. 1 (CS section 100)). It also asks you to change that understanding if the work changes a great deal (AICPA Statement on Standards for Consulting Services No. 1 (CS section 100)). A letter plus signed change orders is the simplest proof of both.
The standard also says you should tell the client about significant reservations on the scope or benefits of the work, and about significant findings along the way (AICPA Statement on Standards for Consulting Services No. 1 (CS section 100)). It asks you to tell the client of conflicts of interest too (AICPA Statement on Standards for Consulting Services No. 1 (CS section 100)). Write those duties into the letter so the client expects them.
Build the scope from workstreams
Break the project into workstreams, then list the activities and the deliverable for each. Put a separate list of what is not included right below it. The table shows a short example for an operations review.
| Workstream | Activities | Deliverable | Client input it needs |
|---|---|---|---|
| Current state | Interviews, process walkthroughs | Process maps and issue log | Org chart, process documents, staff time |
| Analysis | Data review, benchmarking against the client’s own history | Findings memo | Data extracts by the agreed date |
| Recommendations | Options and trade-offs, workshop with leaders | Final report and roadmap | Sponsor feedback within the review period |
| Not included | Implementation, system configuration, hiring | None | Priced by change order if wanted |
The client keeps the management calls
Consulting is advice. The client chooses what to do with it, runs the business and carries out the plan. Say so in the letter, because it limits your liability for outcomes you did not control.
For a CPA firm that also audits or reviews the client, this is an independence rule, not just good drafting. Management responsibilities are acts of leading and directing an entity, such as authorizing transactions or choosing which recommendations to put in place (AICPA Code of Professional Conduct, ET 1.295.030 and 1.295.040). Taking one on for an attest client impairs independence (AICPA Code of Professional Conduct, ET 1.295.030 and 1.295.040). The client must also name someone with suitable skill, knowledge or experience to oversee the work (AICPA Code of Professional Conduct, ET 1.295.030 and 1.295.040).
Milestones, acceptance and change orders
Each deliverable needs a due date and an acceptance period. An acceptance period is the number of days the client has to comment before the deliverable counts as accepted. Without one, a draft can sit for months while the client holds back the last payment. Pick a period that fits the client, such as five or ten business days.
Scope creep is the main way consulting projects lose money. A change order is a short signed form that changes the scope, the timeline or the fee. The letter should say that no added work starts until one is signed, and that you will estimate the cost first. Attach a one-page form so the client sees how easy it is.
List the assumptions the price rests on as well, for example the hours per week the client’s staff will give the project and the date you get system access. When an assumption fails, it triggers a change order instead of an argument.
Who owns the deliverables and the data
Clients assume they own what they paid for. The law is narrower. A work by an outside creator is a work made for hire only if it falls in one of nine listed categories and both parties agree so in a signed writing (U.S. Copyright Office, Circular 30: Works Made for Hire). A consulting report or a financial model may not fit those categories.
So do not rely on the label alone. Write an assignment: the client owns the final deliverables once paid, and you keep your pre-existing methods, templates and know-how, with a license for the client to use them inside the deliverables.
For data, say the client’s data is used only for this project, kept secure, and returned or destroyed at the end. Name how files move, such as a secure upload link rather than email attachments.
Questions people ask
What should a consulting engagement letter include?
The objective, a scope table with exclusions, client inputs and dates, milestones with an acceptance period, a change-order rule, fees and expenses, ownership of deliverables, confidentiality, a liability cap and how either side can end the work.
Is a consulting engagement letter the same as a statement of work?
Not quite. A statement of work describes one project under a master agreement. An engagement letter usually holds both the legal terms and the project scope in one signed document.
Does a CPA need a written consulting engagement letter?
The AICPA consulting standard requires an understanding with the client on responsibilities, scope and limits, which may be oral or written (AICPA Statement on Standards for Consulting Services No. 1 (CS section 100)). A signed letter is the clearest record of it.
Who owns the work product in a consulting engagement?
Whatever the letter says, within copyright law. Work by an outside consultant is a work made for hire only in listed categories with a signed agreement (U.S. Copyright Office, Circular 30: Works Made for Hire), so the letter should add a written assignment on payment.
Sources
- AICPA Statement on Standards for Consulting Services No. 1 (CS section 100): A practitioner establishes a written or oral understanding on responsibilities, nature, scope and limits, modifies it for significant changes, and informs the client of reservations and significant findings.
- AICPA Code of Professional Conduct, ET 1.295.030 and 1.295.040: Management responsibilities include authorizing transactions and choosing which recommendations to implement; assuming one for an attest client impairs independence.
- U.S. Copyright Office, Circular 30: Works Made for Hire: A commissioned work is made for hire only if it falls in one of nine listed categories and the parties agree so in a signed written instrument.
About the author
Arthur Teboul (Founder, DokuTrak) is building DokuTrak after watching professionals lose hours chasing clients for documents over email. Arthur Teboul.
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