Engagement Letter

Question 1

The independent auditor is required

Answer 1

to create written documentation that includes specified information about an upcoming audit engagement to ensure that both parties understand the nature of the work to be performed, the assurance to be given, and the responsibilities of both parties.

**However, no specific format (such as a contract or an engagement letter) is required.

Question 2

What may appear in an engagement letter

Answer 2

Fees for our services are based on our regular per diem rates, plus travel and other out-of-the-pocket expenses

During the course of the audit, we may observe opportunities for economies of scale or improved controls over your operations.

Our engagement is subject to the risk that material misstatements or fraud, if they exist, will not be detected

Management’s responsibility for the entity’s compliance with laws and regulations

Periods covered

Specialized reports to be provided

Question 3

One of the developments that resulted from the 1136 Tenants case was

Answer 3

engagement letters between the CPA and client were strongly recommended for all engagements, but especially unaudited engagements.

The letter should clearly define the intent of the engagement, the CPA’s responsibilities, and any restrictions imposed on the CPA.