Some useful questions to ask an SEO include:

• Can you show me examples of your previous work and share some success stories?
• Do you follow the Google Webmaster Guidelines?
• Do you offer any online marketing services or advice to complement your organic search business?
• What kind of results do you expect to see, and in what timeframe?
• How do you measure your success?
• Whats your experience in my industry?
• Whats your experience in my country/city?
• Whats your experience developing international sites?
• What are your most important SEO techniques?How long have you been in business?
• How can I expect to communicate with you?
• Will you share with me all the changes you make to my site, and provide detailed information about your recommendations and the reasoning behind them?

via Search Engine Optimization SEO – Webmaster Tools Help.

They also link to a news story about how a rogue SEO got caught by the FTC. You can learn more about SEO at http://www.noblesamurai.com/ or if you like working with spreadsheets take a look at simplewebmethodology.com