Objectives of audit engagement letter

The main objectives of audit engagement letter are as follows after that a list of engagement letter to whom sent are given.

Objectives of audit engagement letter

  1. It defines clearly the extent of auditor’s responsibilities and to minimize the possibility of any misunderstanding between the client and the auditor.
  2. It provides written confirmation of the auditor’s acceptance of his appointment the scope of audit and form of his report.
  3. Client becomes aware of the statutory responsibilities of the directors which in no way are diminished by the appointment of an auditor.
  4. Management is informed that the audit tests would be based upon results of erahntian of internal control.
  5. Client is explained the statutory requirements of the company’s ordinance and the matters to be report are satisfied by law; the auditor would be free to report on the matter in respect of which he is not satisfied.
  6. Client become informed about the other professional services that the auditor can provide.
  7. Client is briefed that the discovery of fraud in not the main aim of the audit.
  8. Scope of special or additional work is also determined.
  9. Basis of computation of frees are brought to the knowledge of client.

Engagement letter to whom sent

It should be sent to the following:

Objectives of audit engagement letter

Objectives of audit engagement letter

  1. For new clients after appointed auditor: Engagement letter should be sent to all new clients soon after the appointment as auditor and, in any event, before the commencement of the first audit engagement.
  2. For existing clients, to whom no previously sent: Engagement letter may also be sent to existing clients, to whom no such letter has previously sent, as soon as suitable opportunity occurs.
  3. If change in the nature and scope of assignment: When there is a change in the nature-and scope of assignment or there is a change in job specification, management, size and line, of business, data processing method, the communication of such letter assumes greater importance.
  4. If same auditor for both parent and subsidiary company: When an auditor of a parent company is also the auditor of its subsidiaries a separate engagement letter should be sent to each company audited by him.
  5. If there are joint auditors: When there are joint auditors, engagement letter in similar terms be sent by each auditor when no joint letter is sent.

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3 comments for “Objectives of audit engagement letter

  1. Stephen Sakita
    April 21, 2016 at 4:59 PM

    Very Very well elaborated , it helps me a lot in my study, i like it, thanks for sharing

  2. Stephen
    April 21, 2016 at 5:01 PM

    Great article, this is exactly what i am looking for but most of website don’t have article on the topic audit engagement.

      July 26, 2016 at 5:19 PM

      Thanks for the notes

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