An audit engagement letter is an important piece of documentation that clarifies a firm’s arrangement with each client. It includes terms such as the scope of the audit, in-scope systems, timelines for completion and related deliverables, fees, and other terms and conditions. An effective audit engagement letter allows for more accurate planning of the audit, a better understanding between both parties, and helps avoid costly misunderstandings during an engagement.

An effective audit engagement letter will also outline the responsibilities of both the auditor and client to mitigate risks. In addition to providing the responsibilities of each party, it will also include the auditing standards that will govern the engagement. It is vital to make sure that the terms of an engagement do not conflict with the auditing standards in order to maintain independence and ensure that the audit is conducted in accordance with established procedures.

It is not ideal to get to the end of an audit and find out that one or more systems were not included in the scope, or that the assessment was not based on the Trust Services Criteria. To avoid these types of pitfalls, an effective audit engagement letter should clearly define the scope of the audit, in-scope services and systems, and provide for a consistent definition of those terms across all clients. It should also include a fee arrangement and request that the client confirm in writing their agreement to the terms of the letter. audit engagement letter sample