Page 86 - AAA Integrated Workbook STUDENT S18-J19

Chapter 6 4

Agreeing the terms of engagement

6.1 Agreeing the terms of engagement

 The engagement letter specifies the nature of the contract between the audit
firm and client.

 The engagement letter must be signed before the audit commences.

Engagement letter

Purpose Main contents

 Minimise the risk of  Objective and scope
misunderstandings
 Responsibilities
 Confirm acceptance of
the engagement  Financial reporting
framework
 Set out the terms and
conditions  Form and content of
reports

Additional contents

 Basis of fees

 Reference to
professional standards

 Need for a written
representation letter

 Limitations of an audit

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