3.0 - Agreeing Terms of Engagement

Question 1

What is the first purpose of an engagement letter?

Answer 1

Define clearly the extent of the firm’s responsibilities and so minimise the possibility of any misunderstanding between the client and the firm

Question 2

What is the second purpose of an engagement letter?

Answer 2

Provide written confirmation of the firm’s acceptance of the appointment, the scope of the engagement and the form of their report

Question 3

What happens if an engagement letter is not sent to clients, both existing and new?

Answer 3

There is scope for argument about the precise extent of the respective obligations of the clients and its directors and the auditors

Question 4

An engagement letter for any type of assurance engagement will contain…

Answer 4

The same contents as an audit engagement letter

Question 5

An engagement letter for an assurance engagement other than an audit is likely to refer to…

Answer 5

Specific fees for the engagement

Question 6

Why are specific fees not initially mentioned in an audit engagement?

Answer 6

An audit engagement is often recurring