Engagement Letter
A written agreement establishing the terms, scope, and responsibilities of an audit engagement.
AUD item-writers love to test timing and who signs. The classic stem describes a document obtained, then asks which one it is, or what the auditor must establish before accepting the engagement. The tell: anything about the preconditions for an audit—management acknowledging its responsibility for the financial statements and internal control, and agreeing to provide access to information—points to the engagement letter (AU-C 210). It is the document signed by both the auditor and the client, obtained at the start.
The trap is confusing it with the management representation letter (AU-C 580): signed only by management, addressed to the auditor, and dated as of the audit report date—the very end (some banks frame this “first vs. last document”). Independence is a separate gate—a state to maintain, not an agreement to sign. Also remember: on recurring audits a new letter is not required annually unless terms or circumstances change, and a management-imposed scope limitation severe enough to force a disclaimer means the auditor should not accept the engagement rather than just note it.
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