Acca aa s21 Notes

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6. Typical contents of an engagement letter
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Description of the objective of an audit: to obtain reasonable assurance whether the financial 
statements are free from material misstatement and issue an auditor's report that include an 
audit opinion.
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Defining responsibilities: management’s are to prepare the financial statements and to set up a 
system of internal control. It is the auditor’s responsibility to audit the financial statements.
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Reference to the applicable financial reporting framework. For example, IFRSs.
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Emphasis that audits depend on sampling that there are no guarantees. The audit looks for only 
material misstatements. It will examine records on a test basis that can only give a reasonable 
assurance.
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The auditors will state that they expect unrestricted access to the company’s records and they 
expect full explanations for any queries they might have.
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They will state that the auditor’s report is a matter between them and the addressees of the 
auditor’s report (the members of company) and that it should not be relied upon by other 
parties.
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There will be certain matters about planning the audit, such as arranging the interim audit and 
final audit, attending the inventory counts, organising external confirmation of receivables, and 
liaison with the internal audit department.
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Almost certainly there will be something about fees, and remember fees should never be 
absolute. They should be estimate but subject to the proviso that if more work needs to be 
done, it will be done and additional fees will be required.
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Description of the expected relationship between the external auditor and internal audit; how 
the work of internal audit might be reviewed and then relied on by the external auditors.