As part of our efforts to expose this community to some information that you may never have thought of, or cared about, but you REALLY need to understand, I thought it would be helpful to start a discussion about what is in [or should be in] the Engagement Letter you get from your attorney or CPA. I respect the attorney’s territory and hope our of our legal colleagues will chime in. I will begin by noting that our Engagement Letter is monster. It has cost us > $125K to produce and update and is derived from four principal sources:
- Engagement Letters share with colleagues at Big 4 FIrms
- AICPA Tax Section Engagement Letters and Checklists
- CNA and Travelers Professional Liability Counsel For CPA Firms
- Our own thoughts as reviewed by counsel.
There is a base Engagement Letter with General Terms and Conditions and five specific riders for types of services we provide.
In the interest of brevity, we are providing a link to a Dropbox Showcase which will permit you to view all of the documents in PDF format, but you will not be able to share the links or download the documents. We trust you understand that we are sharing materials that have cost us a tremendous amount of money to produce. We are doing so, not with the intention of selling anything [thought we would certainly welcome the chance to working with anyone. We have also included a number of other documents that are relevant to the commercial cannabis industry in California just to provide some insight with respect to how we assist our clients in conducting business.
You can find the above-referenced documents here.
Just to provide a couple of “teasers” to pique your interest, this is the Cannabis Industry Rider which we append to our Engagement Letter for Cannabis Industry clients.
This is the Cannabis Industry Rider – Incorporated Business Engagement Letter.
Due to the nature of the industry in which you are involved and the fact that the business activity violates certain Federal laws, it is important that you provide us with the following representations in a written document at the conclusion of our engagement and prior to our filing of the tax returns:
All information provided for the preparation of the client’s tax returns, either verbal or written, is true and correct to the best of the client’s knowledge and belief. All items pertaining to gross income are reported without offset or reduction. No items of expense or liability are overstated.
If any of this information is later found to be in error, the client will
(1) notify our firm immediately and
(2) assume full responsibility for any discrepancies.
In the event that our firm is unable to provide tax returns due to delays arising from the untimely response or lack of documentation, the client will hold the firm harmless for any penalties that may incur.
The client acknowledges that a tax provision, known as “Internal Revenue Code Section 280E,” is applicable and that it may potentially limit claimed deductions for business expenses incurred. The client acknowledges that advice has been rendered by our firm regarding the non-deductibility of certain expenses reported on the tax returns and the subsequent tax consequences of these
The client represents that they are not affiliated with any law enforcement agencies. The client further represents that none of the interactions with our firm have been for the purposes of gathering evidence for any court, criminal or civil. If the client is found to be so associated with law enforcement, the client hereby acknowledges that all of the actions taken constitute “entrapment.”
The client asserts that no requests have been made for illegal services or requests to “launder money” or to misrepresent facts to any person, including outside financial institutions. Further, the Client will indemnify, save and hold harmless, our firm and its members and employees from any loss, cost or expense or liability arising out of, or on account of any and all court proceedings, criminal or civil, on actions taken involving the Client
Finally, this is the indemnification language contained in our Engagement Letter…and admittedly is is very aggressive in protecting us.
To the extent permitted by law, the Client agrees that aBIZinaBOX/JSZCPA, and its employees shall not be liable to the Client for any actions, losses, damages, claims, liabilities, costs or expenses in any way arising out of or relating to this engagement for an aggregate amount in excess of the fees paid by them to aBIZinaBOX for the services performed pursuant to this engagement. Further, in no event will aBIZinaBOX or its employees, agents, or representatives be liable for consequential, special, indirect, incidental, punitive, or exemplary loss damage, or expense (including, without limitation, lost profits and opportunity costs).
To the extent permitted by law, the Client shall indemnify and hold harmless aBIZinaBOX and its employees from and against any and all actions, losses, damages, claims, liabilities, costs and expenses (including, without limitation, reasonable legal fees and expenses) brought against, paid, or incurred by any of them at any time, in any way arising out of or relating to aBIZinaBOX services provided in connection with this engagement, except to the extent finally judicially determined to have resulted from intentional misconduct by aBIZinaBOX.
> The Limitation on Liability and Indemnification provisions of this engagement letter shall apply regardless of the form of action, loss, damage, claim, liability, cost or expense, whether in contract, statute, tort (including, without limitation, negligence), or otherwise. These provisions, as well as the other agreements and undertakings of the Client, shall survive the completion or termination of this engagement.
There are some that will assert that we are going too far in seeking to protect ourselves…and that’s too bad. It what we do for ourselves, and seek to do for our clients everyday. If there is sufficient interest, we are willing to go through our entire twenty page Engagement Letter and explain what does what to whom. Our view is that the the best kind of clients we would ever with to have, particularly in tough highly regulated industry like the cannabis industry is clients that are aware and informed about the issues.
As we stated before, we would much rather contribute high quality content to a forum that get up on a soapbox and try to sell something. Thanks for your time, enjoy the holiday.