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Terms in this set (100)

The engagement letter should contain information such as:

the objective of the audit (an expression of an opinion on the financial statements);
the fact that management is responsible for:
the financial statements,
establishing and maintaining effective internal control over financial reporting,
identifying and ensuring that the entity complies with laws and regulations,
adjusting the financial statements to correct material misstatements,
making all financial records and related information available to the auditor, and
providing the auditor with a letter that confirms certain representations made during the audit;
the scope of the audit work to be performed (in accordance with GAAS);
the fact that the purpose of the audit is not to detect fraud but to enable the auditor to express an opinion as to the fairness of the financial statements;
mention that an audit includes obtaining an understanding of internal control and that the audit committee will be made aware of any discovered significant deficiencies;
additional work to be performed, such as tax, consulting, or other services (if applicable);
any limitations or restrictions on the scope of the study;
work to be performed by the client's staff (if applicable);
the basis of the auditor's fee; and
the audit work schedule and estimated date of completion.
This list is not inclusive, but it is illustrative of items that should be present. Items that would not be addressed in an engagement letter would be the conditions under which the auditor may modify the preliminary judgment about materiality (these would not be known to the auditor), internal control activities that would reduce the auditor's assessment of control risk (the auditor has not obtained an understanding of the design of internal control or tested controls at this point), and materiality matters that could modify the auditor's preliminary assessment of fraud risk.