Preliminary arrangements agreed to by the auditors and the client should be documented in writing by the auditors.This documentation is known as:
A)A memorandum to be placed in the permanent section of the auditing working papers.
B)An engagement letter.
C)A client representation letter.
D)A confirmation letter attached to the constructive services letter.

Question

Quizplus · Accepted Answer

Preliminary arrangements are typically agreed upon in an engagement letter, which is a written agreement between the auditor and the client that outlines the scope of the audit and the respective responsibilities of both parties. This letter should be signed by both parties and included in the permanent section of the auditing working papers. Choice A is incorrect because a memorandum is not the appropriate format for an engagement letter. Choice C is incorrect because a client representation letter is a separate document that is obtained by auditors to confirm information provided by the client. Choice D is incorrect because a confirmation letter is used to corroborate information obtained during the audit, not for documenting preliminary arrangements.

Preliminary Arrangements Agreed to by the Auditors and the Client