Client Engagement Letter

Overview

An engagement letter is a written agreement that describes the business relationship to be entered into by a client and a company. The letter details scope of the agreement, type of report, terms for both parties, and costs. The purpose of an engagement letter is to set expectations on both sides of the agreement. The client engagement letter is the basis for audit opinions and critical audit matters. Each one is unique to the client.

Directions

Begin by reading Appendix C from PCAOB found in the Supporting Materials section. You will then use the Client Engagement Notes provided in Supporting Materials to fill in the client engagement letter.

Specifically, you must address each section of the client engagement letter using the following rubric criteria:

Describe the scope of the audit objective.

Identify the type of report to be issued.

1. Explain the auditor’s responsibilities and terms for this agreement.

Explain management’s responsibilities and terms for this agreement.

1. Explain the estimated fee schedule.

Module Two Client Engagement Letter Template
Directions: Complete this template by replacing the bracketed text with the relevant
information.
Date: [month/day/year]
To: [Board of Directors or the appropriate representative of senior management]
From: [XYZ & Co.]
Subject: Audit Engagement Letter of Acceptance
You have requested that we audit the balance sheet of [company name] as of [month/day/year]
and the related statements of income and cash flows for the year then ending.
We are pleased to confirm our acceptance and our understanding of this engagement using this
letter.
[Scope of the audit]
[Type of report]
[Auditor’s responsibilities and terms]
[Management’s responsibilities and terms]
[Estimated fee schedule]
Please sign and return the attached copy of this letter to indicate that it is in accordance with your
understanding of the arrangements for our audit of the financial statements.
[XYZ & Co.]
Acknowledged on behalf of [XYZ Company] by
[signature]
[Student Name and Role]
Date: [month/day/year]
Module Two Client Engagement Letter Template
Directions: Complete this template by replacing the bracketed text with the relevant
information.
Date: [month/day/year]
To: [Board of Directors or the appropriate representative of senior management]
From: [XYZ & Co.]
Subject: Audit Engagement Letter of Acceptance
You have requested that we audit the balance sheet of [company name] as of [month/day/year]
and the related statements of income and cash flows for the year then ending.
We are pleased to confirm our acceptance and our understanding of this engagement using this
letter.
[Scope of the audit]
[Type of report]
[Auditor’s responsibilities and terms]
[Management’s responsibilities and terms]
[Estimated fee schedule]
Please sign and return the attached copy of this letter to indicate that it is in accordance with your
understanding of the arrangements for our audit of the financial statements.
[XYZ & Co.]
Acknowledged on behalf of [XYZ Company] by
[signature]
[Student Name and Role]
Date: [month/day/year]
ACC 411 Module Two Client Engagement Notes
CPA firm: SNHU Audit Partners, Certified Public Accountants
Client representative: Mr. Jamal Mack, President
Client name: LSB Enterprises
Address: 123 Main Street, Savannah Georgia, 31401
Financial statement: End date: 12/31/2022
Fees and schedule: Time and materials billed as work progresses plus out-of-pocket expenses. Our fees
will be billed as work progresses and are based on the amount of work being performed. Estimated fees
for the audit and review of internal controls will range from $100,000 to $150,000. Anticipated start
date is January 2, 2023, estimated completion is February 28, 2023.
Scope of audit: Financial Statements and Internal Controls over Financial Reporting