November 29, 2023

An agreement between auditor and client is an important part of the auditing process. It defines the fundamental duties of an auditor and specifies their responsibilities as well as details the expectations from the company. Some contracts can also include a standard code of conduct that the auditor must abide by while carrying out an auditing exercise.

Auditors usually draft and send an engagement letter to their clients, which describes the scope of their services. It usually specifies the precise services to be provided (including any deadlines), performance standards, the precise sum and schedule of client payments, and any performance guarantees. In addition, it outlines the responsibilities of the auditor and limits their rights to information and access to data in accordance with the terms of the contract.

This ensures that the auditing process runs smoothly. It also helps prevent scope creep and keeps the audit within its predetermined boundaries. Moreover, it protects the auditor and the client from unexpected costs, which can be quite expensive.

In addition, an engagement letter should specify the responsibilities of the company and its management. These should include facilitating the auditor’s access to relevant information, records and personnel, ensuring compliance with financial reporting frameworks, and maintaining professional skepticism and independence.

According to research, clients desire added-value information from their auditors as well as a trusting and long-term relationship. However, it is possible that such a relationship might conflict with the auditor’s need to remain independent from their clients and at arm’s length from them.

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