a) You are required to identify any four contents of an audit engagement letter.
The form and contents of an engagement letter may vary from client to client but would generally include:
- The objective of the audit of financial statements;
- Management‘s responsibility for the financial statements;
- The scope of the audit including reference to applicable legislation, regulations, or pronouncements of professional bodies to which the auditor adheres;
- The form of any reports or other communication of the results of the engagement;
- The fact that because of the test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal control system, there is unavoidable risk that some material misstatements may remain undiscovered;
- That the auditor will have unrestricted access to whatever records, documentation and other information requested in connection with the audit;
- Details of other services to be provided such as taxation and management consultancy work;
- Fee – Basis on which it is computed, rendered and paid;
- Expectation of receiving from management written confirmation concerning representations made in connection with the audit;
- Request for the client to confirm the terms of the engagement by acknowledging receipt of the engagement letter.