This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members understand the benefits of a disengagement letter and to provide an example which they may wish to use.

Members may also wish to refer to the following related helpsheets:

• Disengagement checklist
• Change of professional appointment – Outgoing accountant
• Resigning close to tax filing deadline

The purpose of a disengagement letter is to clarify with the client the matters for which your firm will still have responsibility during any handover and those responsibilities that will fall to the new accountant.

It is important that there is no misunderstanding as to what work has been completed and what remains outstanding for the client or their new accountant to deal with. This is particularly important where you have been engaged with ongoing and business-critical assignments such as payroll processing or preparation of VAT returns.

We recommend you establish and communicate to the client a clear cut-off point in respect of your responsibilities. This communication may be oral with the client or, in some cases, even with the new accountant, although a written disengagement letter is best practice. 

A disengagement letter provides the client with a clear and unambiguous summary of:

• Matters, both within the terms of engagement and any additional matters, that have been dealt with;
• What remains to be done;
• The date by which any outstanding or incomplete matters need to be completed;
• What further work (if any) your firm will undertake; and
• The fees due from the client, both for past work and any additional work yet to be performed.

Practically, it may be best to issue a disengagement letter (an example of which is available in Appendix 1 ) accompanied by a status report (an example status report is available in Appendix 2 ) setting out the current position.

What if my client does not return a disengagement letter

Even if the client fails or refuses to sign the disengagement letter acknowledging it and return it to you, the fact that such a letter was sent should prove of value in upholding your firm’s position in any ensuing disagreements.

However, if the client does not return the disengagement letter, and you were relying on the client’s response to provide you with the authority you need to communicate with the successor accountant, you would usually still need to obtain the client’s authority to respond to any professional enquiry by other means (e.g. an email from the client giving you such permission). Further guidance is available in the helpsheet Change of professional appointment – Outgoing accountant.

Within the appendices, guidance and instruction are shown as italics. None of this italicised text is for inclusion in your disengagement letters, and you should be careful to ensure that it is removed from the final copy.

In some paragraphs, we have provided optional or alternative wording. This is shown in [square brackets] and each suggestion requires your individual consideration and possible amendment based on your specific circumstances.

We have marked with an asterisk* those areas where each reference will need to be considered on its relevance.

If additional specific information is needed, such as a name or year end, this is indicated this by a dotted line: .................

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.

• Download the sample disengagement letter wording and example status report