The form and content of audit engagement letters may vary for each client, but they would generally include the following basic contents of an audit engagement letter. But first, we should know some other basic things about the audit engagement letter.
What Is an Audit Engagement
When a company has to go through the audit process, an examiner may use the title “audit engagement.” It can mean various things, so it is important that the auditor clarifies what he intends when he uses the term. Although which definition the account follows, however, the auditor forever follows specific methods and guidelines for handling the commitment.
Contents of an audit engagement letter
- The names of both parties;
- The objectives of the engagement;
- The scope of the audit;
- The accounting responsibility and audit responsibility;
- The duties of both parties; (management and auditor). The deadline for the issuance of the audit report;
- The responsibility arising from the use of the audit report;
- The audit fees;
- The period for which the audit engagement letter is valid;
- The responsibility arising from a violation of the terms of the audit engagement letter;
- The date of signing the audit engagement letter; and
- Other matters which both parties consider need to be included in the audit engagement letter.
- The form of any reports or other communication of results of the engagement.
- The fact that due to the test nature and other limitations of an audit, there is an unavoidable risk that some material misstatement may remain undiscovered.
- The fact that auditors are entitled to unrestricted access to records, documents, and other information requested in connection with the audit.
The letter may also cover practical matters, such as arrangements relating to planning, using the work of experts, liaising with the internal audit department, the fee, and restriction of auditor liability.
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