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1.06 - Engagement Letter

Terms in this set (10)

Auditor's responsibilities
- conducting an auditing accordance with GAAS
- provide reasonable assurance
- understand the regulatory environment
- assess I/C
- informing the client of improvements in control or economy of operations that come to the auditor's attention during the engagement
Client's responsibilities
- preparation & fair presentation of the F/S
- design, implementation, & maintenance of I/C
- comply with all laws & regulations
- making available all records
- not limiting the scope of the auditor's work
- paying the fee based on the agreed-upon method
Written understanding with the client will include:
- a statement that, due to inherent limitations of an audit & I/C, material misstatements may not be detected
- identification of the AFRF
- reference to the expected form & content of the report with an indication that the actual report may differ
Elements of the engagement letter FACSIMILE
Fees
Auditor's responsibilities
Confirmation of engagement
Scope & objective of engagement
Internal control
Management's responsibility
Irregularities (Fraud)
ILlegal acts
Errors
Layout of Engagement Letter
1. Objective & Scope of the Audit
2. Responsibilities of the Auditor
3. Responsibilities of Management & Identification of the AFRF
4. Other relevant information
5. Reporting
Engagement Letter: Objective & Scope of the Audit
- identify statements being audited
- objective to issue an opinion on F/S
Engagement Letter: Responsibilities of the Auditor
- conduct audit in accordance with GAAS
- obtain reasonable assurance that F/S are free from material misstatement
- audit involves performing procedures to obtain evidence
- procedures selected depend on auditor's judgement, including RMM of F/S whether due to fraud or error
- evaluate appropriateness of policies, estimates, presentation of F/S
- inherent limitations of audit & I/C cause an unavoidable risk that some material misstatements may not be detected
- consider I/C in making risk assessments
- communicate significant deficiencies or material weaknesses in I/C relevant to the audit of the F/S
Engagement Letter: Responsibilities of Management & Identification of the Applicable Financial Reporting Framework
Management accepts responsibility for:
- preparation & fair presentation of F/S in accordance with AFRF
- design, implementation, & maintenance of I/C
- to provide auditors with access to all relevant & requested info
Engagement Letter: Other Relevant Info
- provide client with list of schedules & info needed to conduct audit
- client will provide info on timely basis
- fees
Engagement Letter: Reporting
- issue a report upon completion of audit
- no assurance on opinion to be given
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