An audit engagement letter is a document that sets out the terms of an auditor’s work with a client. These letters define the extent of the auditor’s responsibilities, and help minimize misunderstandings between the client and the auditor. The letter also establishes the scope of an assurance engagement, and includes a request for management’s representation that all matters relating to internal control over financial reporting or an integrated audit of both the system and the financial statements are identified.
While the specific contents of an engagement letter will vary by the audit scope, the American Institute of Certified Public Accountants (AICPA) has established a set of templates that are commonly used for audits. Jotform’s free Audit Engagement Letter Template includes standard terms of engagement, such as confidentiality commitments and the requirement that an audit report must be issued within 30 days. You can easily customize the wording and include additional terms and conditions for your specific auditing needs, including general liability limitations, a mediation or binding negotiation clause, and electronic data management provisions.
The auditor’s responsibilities should also be outlined in the engagement letter, and should disclaim any obligation regarding fraud detection. This is particularly important as the letter may be viewed as a legally binding contract between parties, and will likely be filed with any disputes in court.
Aside from clarifying the terms of an engagement, an audit engagement letter should also outline related deliverables for the audit, such as an evaluation of internal controls and preparation of the audit report and opinion letter at the end of the engagement. This helps avoid misunderstandings between the client and the auditor, as well as ensures that all necessary procedures are performed. audit engagement letter sample