Objectives of an Audit Engagement Letter

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

Objectives of an 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 an audit and the form of his report.
3. The 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 the results of erahntian of internal control.
5. The client has explained the statutory requirements of the company’s ordinance and the matters to be reported are satisfied by law; the auditor would be free to report on the matter in respect of which he is not satisfied.
6. The client become informed about the other professional services that the auditor can provide.
7. The client is briefed that the discovery of fraud is not the main aim of the audit.
8. The scope of special or additional work is also determined.
9. Basis of computation of frees is brought to the knowledge of the client.

Engagement letter to whom sent

It should be sent to the following:

1. For new clients after appointed auditor: Engagement letter should be sent to all new clients soon after the appointment as an 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 a suitable opportunity occurs.
3. If a 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 the job specification, management, size, and line, of business, data processing method, the communication of such letter assumes greater importance.
4. If the 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 letters in similar terms be sent by each auditor when no joint letter is sent.

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