Terms of Audit Engagement

Terms of Audit Engagement

Auditor and management of entity must agree on term of audit engagement. This agreement should be in the written form. Technically this agreement is known as engagement letter.

Significance of Terms of Engagement

Engagement letter is very important document, because it set a formal agreement between management and auditor, and secondly it avoids any confusion and misunderstanding between auditor and management.

Terms of Engagement for Recurring audit

Auditor will determine the two things in case of recurring audit

1)    Terms of engagement requires revision

2)    Need of reminder of term of engagement

Change in Terms of Engagement

Auditor shall carry out the audit in accordance with original term of condition, and shall not agree to a change in term of engagement, unless there is reasonable justification. If terms of engagement are changed then auditor and client must be agree to new terms.

Change in Terms is not agreed

Where auditor is not agree with new terms and auditor is not allowed to carry out the audit in accordance with original terms , then auditor shall withdraw from the audit ( if possible under law) ,and determine that whether this is need to report to the other parties . Sometime there is contractual requirement to report to other parties in aforesaid situation