APES 305 Terms of Engagement
APES 305 Terms of Engagement
[Supersedes APES
305 Terms of Engagement issued in October 2015]
REVISED: August 2019
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APES 305 Terms of Engagement
ope and application ................................................................................................................. 1
Definitions .................................................................................................................................... 2
Terms of Engagement for Professional Services ........................................................................ 3
General contents of an Engagement Document ......................................................................... 4
Recurring Engagements .............................................................................................................. 5
Professional Standards Schemes ................................................................................................ 6
Conformity with International Pronouncements
1: Summary of revisions to the previous APES 305 (Issued in October 2015)
APES 305 Terms of Engagement
1. Scope and application
1.1 The objectives of APES 305 Terms of Engagement are to specify a Member in
Public Practice’s professional and ethical obligations in respect of:
documentation and communication of the Terms of Engagement to a Client;
matters to be included in an Engagement Document;
circumstances in which an Engagement Document should be reissued in
respect of a recurring Engagement; and
limitation of liability schemes.
Accounting Professional & Ethical Standards Board Limited (APESB) has revised
professional standard APES 305 Terms of Engagement (the Standard), which is
effective for Engagements commencing on or after 1 January 2020 and supersedes
APES 305 Terms of Engagement issued in October 2015. Earlier adoption of this
Standard is permitted.
APES 305 sets the standards in respect of Terms of Engagement for Members in
Public Practice in the provision of quality and ethical Professional Services to
Clients. The mandatory requirements of this Standard are in bold-type, preceded or
followed by
discussion or explanations in normal type. APES 305 should be read in
conjunction with other professional duties of Members, and any legal obligations
that may apply. In some instances there are specific standards applicable to
Members in Public Practice issued by other standard setting bodies or specific
requirements of statutes in respect of Terms of Engagement, for example ASA 210
Agreeing the Terms of Audit Engagements issued by the Auditing and Assurance
Standards Board which governs audit Engagements. Compliance with these other
standards or statutes should result in compliance with APES 305.
Members in Public Practice in Australia shall follow the mandatory
requirements of APES 305 when they provide Professional Services to
Members in Public Practice practising outside of Australia shall follow the
provisions of APES 305 to the extent to which they are not prevented from so
doing by specific requirements of local laws and/or regulations.
Members in Public Practice shall comply with other applicable Professional
Standards and be familiar with relevant guidance notes when providing
Professional Services. All Members shall comply with the fundamental
principles outlined in the Code.
The Standard is not intended to detract from any responsibilities which may be
imposed by law or regulation.
All references to Professional Standards, guidance notes and legislation are
references to those provisions as amended from time to time.
In applying the requirements outlined in APES 305, Members in Public Practice
should be guided not merely by the words but also by the spirit of this
Standard and
the Code.
In this Standard, unless otherwise specified, words in the singular include the plural
and vice versa, words of one gender include another gender, and words referring to
persons include corporations or organisations, whether incorporated or not.
APES 305 Terms of Engagement
2. Definitions
Defined terms are shown in the body of the Standard in title case.
For the purpose of this Standard:
Client means an individual, firm, entity or organisation to whom or to which Professional
Activities are provided by a Member in Public Practice in respect of Engagements of either a
recurring or demand nature.
Code means APES 110 Code of Ethics for Professional Accountants (including
Independence Standards).
Engagement means an agreement, whether written or otherwise, between a Member in
Public Practice and a Client relating to the provision of Professional Services by a Member in
Public Practice. However, consultations with a prospective Client prior to such agreement are
not part of an Engagement.
Engagement Document means the document (i.e. letter, agreement or any other appropriate
means) in which the Terms of Engagement are specified in Writing.
Firm means:
(a) A
sole practitioner, partnership, corporation or other entity of professional accountants;
(b) An entity that controls such parties, through ownership, management or other means;
(c) An entity controlled by such parties, through ownership, management or other means;
(d) An Auditor-General’s office or department.
Member means a member of a Professional Body that has adopted this Standard as
applicable to their membership, as defined by that Professional Body.
Member in Public Practice means a Member, irrespective of functional classification (for
example, audit, tax or consulting) in a Firm that provides Professional Services. This term is
also used to refer to a Firm of Members in Public Practice and means a practice entity and a
participant in that practice entity as defined by the applicable Professional Body.
Professional Activity means an activity requiring accountancy or related skills undertaken by
a Member, including accounting, auditing, tax, management consulting, and financial
Professional Bodies means Chartered Accountants Australia and New Zealand, CPA
Australia and the Institute of Public Accountants.
Professional Services means Professional Activities performed for Clients.
Professional Standards means all standards issued by Accounting Professional & Ethical
Standards Board Limited and all professional and ethical requirements of the applicable
Professional Body.
Terms of Engagement means the terms and conditions that are agreed between the Client
and the Member in Public Practice for the Engagement.
Writing means a mode of representing or reproducing words in a visible form and includes
words in an electronic format capable of being converted to printed text.
APES 305 Terms of Engagement
3. Terms of Engagement for Professional Services
3.1 A Member in Public Practice shall document and communicate to the Client
the Terms of Engagement.
3.2 The practice of documenting and communicating the Terms of Engagement should
ensure that there is a clear understanding between the Client and the Member in
Public Practice regarding the Terms of Engagement.
3.3 It is in the interests of both the Client and Member in Public Practice that the
Member documents and communicates the Terms of Engagement, preferably
before the Engagement commences, to avoid misunderstandings with respect to the
3.4 A Member in Public Practice shall document the Terms of Engagement in the
Engagement Document.
3.5 The Engagement Document need not be in the form of a letter or agreement. For
example, a standard format handout, brochure, leaflet or electronic communication
is also acceptable.
3.6 The objectives and scope of some Engagements are established by law.
Documentation of the Terms of Engagement cannot reduce obligations imposed by
law. Where the Engagement is undertaken under statute, a Member in Public
Practice should refer to the applicable provisions of the law in the Engagement
4. General contents of an Engagement Document
4.1 The following is a guide to matters that should, for most Engagements, be
considered for inclusion in an Engagement Document. Engagement Documents will
vary according to the nature of the Engagement and the terms of appointment of the
Member in Public Practice. The matters referred to below in paragraphs 4.2 to 4.10
should therefore be varied to meet the individual requirements and circumstances of
each Engagement.
4.2 Purpose: The Engagement Document should explain that its purpose is to set out
and confirm the understanding of the Member in Public Practice of the Terms of
4.3 Objectives of the Engagement: A brief summary of the objectives of the
Engagement including reference to the fact that:
(a) procedures to be performed will be limited exclusively to those related to the
(b) neither an audit nor a review will be conducted and, accordingly, no
assurance will be expressed (if applicable); and
(c) unless otherwise agreed, the Engagement cannot be relied upon to disclose
irregularities, including fraud, other illegal acts and errors that may occur.
4.4 Scope of the Engagement: Pertinent details of such matters as:
(a) time periods covered by the Engagement;
(b) period of appointment and time schedules;
(c) references to any legislation, regulations, Professional Standards, accounting
or auditing and assurance standards that may be relevant to the Engagement;
APES 305 Terms of Engagement
(d) any limitations on the conduct of the Engagement including scope limitations
and limitations arising from legal or professional and ethical requirements;
(e) Client operations or procedures to be included in the Engagement; and
(f) details of information to be provided by the Client.
The Member in Public Practice should consider the implications of a recurring
Engagement when documenting the details noted above.
Engagement output: Details of reports or other anticipated outputs, including:
(a) expected timing;
(b) the intended use and distribution of reports; and
(c) the nature of any anticipated disclaimer or arrangement that limits the liability
of the Member in Public Practice (for example, appropriate limitation of
liability clauses for Members in Public Practice participating in Professional
Standards Legislation schemes) with respect to the Client or any other user
of the results of the Engagement.
4.6 Relative responsibilities: Responsibilities agreed upon, detailing those
acknowledged to be the responsibility of:
(a) the Member in Public Practice, including reference to relevant confidentiality
requirements and th
e impact of them on the quality review program of the
relevant Professional Body to which the Member in Public Practice belongs,
and the Member’s obligations on responding to actual or suspected non-
compliance with laws and regulations (NOCLAR);
(b) the Client, noting the fact that the Client is responsible for the completeness
and accuracy of information supplied to the Member in Public Practice; and
(c) any third party.
Involvement of other Members in Public Practice: Where the work of another
Member in Public Practice is to be used on some aspects of the Engagement, the
details of this involvement should be documented in the Engagement Document.
Fees and billing arrangements: Reference to the basis and calculation of fees (for
example, time based billing, fixed price contracts, referral fees and commissions,
contingent fee arrangements or other similar agreement). Details of agreed upon
billing schedules should also be included.
Ownership of documents: The Engagement Document should make clear who owns
any documents produced as a result of the Engagement or provided by the Client
for such a purpose including electronic data. If a Member in Public Practice has a
policy of seeking to exercise a right of lien over such documents in the event of a
dispute with the Client, this policy should be disclosed in the Engagement
Document communicated to the Client, including the process for dealing with
disputes over the lien.
Confirmation by the Client: Request for a response from the Client confirming its
understanding of the Terms of Engagement as outlined in the Engagement
Document. It is preferable for this confirmation of Client acceptance of the Terms of
Engagement to be obtained in Writing.
APES 305 Terms of Engagement
5. Recurring Engagements
5.1 In certain circumstances a Member in Public Practice will have to determine
whether an Engagement is a recurring Engagement. A recurring Engagement
generally exhibits the following features:
unchanged Terms of Engagement under which the Professional Services are
the same or similar Professional Service provided by the Member in each
defined or identifiable commencement and completion dates each time the
Engagement is performed; and
performance of the Engagement is on a regular periodic basis as agreed with
the Client, for example annually.
5.2 When determi
ning the need to reissue or amend an Engagement Document for a
recurring Engagement, a Member in Public Practice should consider the following
(a) any indication that the Client misunderstands the objectives and scope of the
(b) any significant changes in the Engagement;
(c) any significant changes in the Professional Services to be provided or the
Terms of Engagement;
(d) a recent change of Client management or ownership;
(e) a significant change in the nature or size of the Client's business;
(f) any significant changes to Professional Standards or applicable accounting or
auditing and assurance standards; and
(g) any changes to legal or regulatory requirements.
Professional Standards Schemes
A Member in Public Practice who is participating in a Professional Standards
Scheme that limits liability shall comply with the relevant Professional
Standards Legislation and applicable regulations of the Professional Body.
A Member in Public Practice who is a participant in a scheme under
Professional Standards Legislation shall disclose to the Client that the
Member’s liability may be limited under the scheme in accordance with the
disclosure requirements in applicable laws and/or regulations.
Conformity with International Pronouncements
The International Ethics Standards Boards for Accountants (IESBA) has not issued a
pronouncement equivalent to APES 305.
APES 305 Terms of Engagement
Appendix 1
Summary of revisions to the previous APES 305 (Issued in October
APES 305 Terms of Engagement was originally issued in December 2007 and revised in
June 2009, March 2013 and October 2015. APES 305 has been revised by APESB in August
2019. A summary of the revisions is given in the table below.
Table of revisions*
Paragraph affected
How affected
2 Introduction
2 Definition of Code
2 Definition of Engagement Document
2 Definition of Firm
2 Definition of Member in Public Practice
2 Definition of Professional Activity
2 Definition of Professional Standards
2 Definition of Writing
6 Heading
* Refer Technical Update 2019/5