Audit and Assurance Practice Exam 2026 – The Complete All-in-One Guide for Exam Success!

The purpose of an engagement letter in auditing is to outline the terms of the audit engagement. This letter serves as a formal agreement between the auditor and the client, clearly detailing the scope of the audit, the responsibilities of both parties, and the objectives of the audit. By defining these terms, the engagement letter helps ensure that there is a mutual understanding of what will be performed during the audit process, the timeframe, and the expectations regarding deliverables.

An engagement letter also typically includes important information such as the audit's compliance with relevant auditing standards, the intended use of the audit report, and any limitations on the audit. This clarity helps to prevent misunderstandings and provides a framework for addressing issues that may arise during the audit.

While the engagement letter may include confirmation of fees and payment structure as part of the overall terms, its primary function is to articulate the scope and purpose of the audit. Therefore, it's crucial for establishing a strong foundation for the audit process.