Question

A CPA has been asked to audit the financial statements of a publicly held company for the first time. All preliminary verbal discussions and inquiries among the CPA, the company, the predecessor auditor, and all other necessary parties have been com- pleted. The CPA is now preparing an engagement letter.

Answer 1

The Audit commitment Letter is composed by the Auditor to the leading body of the organization. It incorporates following

1. Brief depiction of administrations to be rendered and additionally which are intended to be rendered. For Example-Audit of budget report, Evaluation of inside controls, readiness of administrative report and so forth.

2. Particulars of responsiabilites of the reviewer and the board of the organization.

3. Requirements of the organization/. Example-Timing of access to bookkeeping records and so on.

4. Evaluated date of culmination and accommodation of the report of budget summaries.

5. Subtleties of assisstance to be given by the firm.

6. Disclaimer portraying the breaking points of the review.

Benefits derived from preparation of Audit Engagement Letter are as follows

I) It sets up a comprehension of the administrations to be given.

ii) It encourages customers assisstance .

iii) Many of the bookkeeping issues are unraveled.

iv) Describes the duties of the administration.

v) Helps evaluator to lead review in a viable and productive way.

The advantage of the engagement letter is it is the documentation of the roles and responsibilities of the auditor and the client and therefore avoids any future misunderstanding. In case of any dispute the engagement letter serves as the source of clarification.