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Chapter 07 - Agreeing terms of engagement - Coggle Diagram
Chapter 07 - Agreeing terms of engagement
Purpose of engagement letters
Provide written agreements and audit terms between auditors and management or TCWG
Confirms common understanding between auditors and management or TCWG
Contents of an engagement letter
Objective of the audit
Scope of the audit
Identification of applicable financial reporting framework
Time schedule
Deliverables: how opinion will be communicated - letter, report or certificate
Permission to communicate with previous accountant
Access to all records
Management's responsibility for effective internal control
Change to engagement letters - Happened if any of the following factors are present
Any indication of misunderstanding of the entity about audit objective and scope
Any revised or special terms of the audit engagement
Recent change in senior management or change in ownership
Significant change in nature and size of entity
Change in legal or regulatory framework
Change in financial reporting framework
Change in other reporting framework
What if management refuse to sign engagement letter?
Discuss matter again to reach compromise
Remind directors that statutory audit require info available to auditor
Explain that lack of info will affect scope of audit work
Finally note that auditor may decline the work