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Chapter 3

2.3 Engagement letters

 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

 Objective and scope
 Minimise the risk of

misunderstandings
 Responsibilities

 Confirm acceptance of  Financial reporting
the engagement framework

 Set out the terms and  Form and content of
conditions reports

Additional contents

 Basis of fees

 Reference to
professional standards

 Need for a written

representation letter

 Limitations of an audit

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