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What is engagement letter in audit? What is its intended purpose?

What is engagement letter in audit? What is its intended purpose?
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Answer #1

Engagement letter is where client and auditor agrees to the terms of engagement. Agreed terms form part of engagement letter and thus forms part of contract to avoid unnecessary confusions regarding the scope of audit and responsibility of both the auditor and the management. Purpose of this letter is to clear beforehand

* Scope of the audit

*Responsibility of auditor & role of the auditor in applying procedures

* Responsibility of the management

* Application of GAAP and accounting principles

* Clarification that audit report contains only an opinion regarding true and fair nature.

* contents of audit report

* fees and other charges

* any other important term which auditor wants to convey to the management and form part of the contractual agreement.

Do give your feedback! Happy learning :) :)

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