An audit engagement letter is a written agreement between you and your client that establishes the scope of your work as an auditor, your responsibilities, and your fee. It’s also a binding contractual agreement that must be in place before you begin your audit. In this article, we’ll cover when to use an audit engagement letter sample, how to prepare an audit engagement letter, and what required or recommended audit engagement terms to include.
An audit engagement letter should be sent to a new client as soon as verbal confirmation of the appointment is received and, in any event, before the start of any audit work. It should also be sent to existing clients to whom no such letter has been previously sent. It is important to ensure that the audit engagement letter clearly delineates the extent of the auditor’s responsibilities and minimizes the possibility of misunderstanding between the parties.
The audit engagement letter should also make clear that the auditor’s examination of the financial statements is limited by law and that management is responsible for preventing fraud and defalcations. It should also explain the nature of other professional services that the auditor can provide and the basis for determining fees.
An effective audit engagement letter is a necessity for any service company that offers tax returns, auditing, accounting, financial consulting, and legal assistance. To simplify the process of getting your client’s data for an audit, try File Request Pro — our all-in-one document collection tool that includes an audit engagement letter template, automation tools, redundant backups, and integrated access controls.