A written agreement between the auditor and client outlines their professional relationship and clarifies the scope of auditing activities. This document is important to mitigate risks and avoid misunderstandings between the parties. It can be easily drafted using Jotform’s free Audit Engagement Letter template. It should include an introduction, the objectives and scope of the audit, the extent of the responsibilities of both parties, fees and billing arrangements, and confidentiality provisions.
Generally, the letter should be sent to new clients as soon as possible after the appointment and, preferably, before commencement of the first audit engagement. It should also be sent to existing clients if there is any indication that the client misunderstands the objective and scope of the audit or if there has been a recent change in the client’s management, size, line of business, or data processing method.
The letter should clarify the purpose of the audit and state that an audit is not designed to detect all instances of fraud or error in a client’s financial statements. It should also state that the auditor is bound by professional standards and regulations to maintain confidentiality of client information.
It should also include a list of specified financial interests that are likely to impair the auditor’s independence as to a particular audit client. This list is not intended to be exhaustive, and the effect of other types of financial interests on the auditor’s independence will be determined in accordance with the general standards set forth in rule 2-01(c)(1). agreement between auditor and client