Engagement letter
An engagement letter records the agreed terms of an audit or other engagement, including objectives, scope, responsibilities and the expected form of reporting. It helps establish a common understanding before work begins, subject to applicable requirements. For an audit, it ordinarily confirms the reporting framework, the objective and scope, and management’s and the auditor’s responsibilities. It may explain the expected report and acknowledge that its form can change with the circumstances. Changes in terms require appropriate consideration.
Worked example
The letter records that management prepares the financial statements and gives the auditor access to information and personnel.
Common mistake
An engagement letter does not transfer management’s responsibility for the statements to the auditor.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AA | Direct | September 2026–June 2027 |
| ACCA | AAA (INT) | Direct | September 2026–June 2027 |
