Engagement Letter

Question 1

What is the purpose of the engagement letter?

Answer 1

To establish an understanding with the client about the services to be performed and each party’s responsibilities

Question 2

Which Statement of Auditing Standard requires an engagement letter to be in writing?

Answer 2

SAS No. 108

Question 3

Management responsibilities outlined in the engagement letter

Answer 3

The financial statements
Design and implementation of internal controls
Compliance with applicable laws and regulations
Making financial records available to the auditor
Delivering a management representation letter
Agree to adjust the financial statements for any material misstatements

Question 4

Auditor’s responsibilities outlined in the engagement letter

Answer 4

Express an opinion on the financial statements
Conduct the audit in accordance with GAAS or PCAOB
Obtain an understanding of internal control to plan the audit
Determine the nature, timing, and extent of audit procedures to be performed
Communicate significant deficiencies in internal control with those charged with governance.

Question 5

Define management representation letter

Answer 5

Delivered to auditor at the conclusion of the engagement

Documents certain representations made by management to the auditors during the engagement

Question 6

Miscellaneous matters addressed on the engagement letter

Answer 6

Arrangements involving specialists
Arrangements involving predecessor auditor
Details regarding fees and billing arrangements
Additional services to be provided

Question 7

4 sections of the engagement letter

Answer 7

Services and Related report
Auditor’s responsibilities and limitations
Management’s responsibilities
Timing, fees, and other matters