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Auditor Appointment /Audit Engagement Letter in UAE,Dubai

An audit engagement is an arrangement that an auditor has with a client to perform an audit of the client’s accounting records and financial statements. The term usually applies to the contractual arrangement between the two parties, rather than the full set of auditing tasks that the auditor will perform. To create an engagement, the two parties meet to discuss the services needed by the client. The parties then agree on the services to be provided, along with a price and the period during which the audit will be conducted. This information is stated in an engagement letter, which is prepared by the auditor and sent to the client. If the client agrees with the terms of the letter, a person authorized to do so signs the letter and returns a copy to the auditor. By doing so, the parties indicate that an audit engagement has been initiated. This letter is useful for setting the expectations of both parties to the arrangement.

The term may also indicate all of the work performed by an auditor for a client under the terms of an engagement letter. In this case, an audit engagement spans the full range of audit procedures that may be used, including the examination of the client’s financial statements and the preparation of an audit report.

The engagement letter should cover:

  • the purpose of the engagement;
  • specifically what the CPA “will and won’t do” (the scope);
  • client instructions and responsibilities;
  • reliance on facts the client gives the CPA;
  • known adverse or negative conditions or circumstances;
  • billing rates and estimates;
  • request for the client’s signature; and
  • instructions to return the signed engagement letter.

In addition, engagement letters can include:

  • warnings about inadequate internal control;
  • limitations on distribution of financial statements (what the client intends to do with them);
  • arbitration clause; and
  • record retention policy.

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