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
- It defines clearly the extent of auditor’s responsibilities and to minimize the possibility of any misunderstanding between the client and the auditor.
- It provides written confirmation of the auditor’s acceptance of his appointment the scope of an audit and the form of his report.
- The client becomes aware of the statutory responsibilities of the directors which in no way are diminished by the appointment of an auditor.
- Management is informed that the audit tests would be based upon the results of erahntian of internal control.
- 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.
- The client become informed about the other professional services that the auditor can provide.
- The client is briefed that the discovery of fraud is not the main aim of the audit.
- The scope of special or additional work is also determined.
- 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:
- 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.
- 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.
- 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.
- 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.
- 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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