The purpose of an engagement letter is to
A) document the CPA firm's responsibility to external users of the audited financial statements.
B) document the terms of the engagement.
C) notify the audit staff of an upcoming engagement so that personnel scheduling can be facilitated.
D) emphasize management's responsibility for approving the audit program.

Question

Quizplus · Accepted Answer

An engagement letter documents the terms of the engagement, including the specific services to be provided, the responsibilities of the auditor and the client, and the scope and limitations of the audit. The purpose is to ensure that both parties understand and agree to the terms of the engagement, and to minimize the risk of misunderstandings or disputes later on. While the CPA firm's responsibility and management's responsibility may be addressed in the engagement letter, these are not the primary purposes of the letter.

The Purpose of an Engagement Letter Is to