Question

Once it has been determined that a specialist is required, the next step is for the auditors to determine the scope of the work to be carried out and agreed to by the specialist. Which of the following represents the "best" approach for recording this agreement?

1) A formal engagement letter with the specialist.
2) A verbal agreement.
3) No agreement should be made.
4) Recording the agreement in the audit planning documents when using an outside specialist.

Answer 1

A formal engagement letter is the best approach for recording an agreement with a specialist, as it clearly defines roles and expectations in a legally binding document, contrasting with the informal nature of verbal agreements.

Step-by-step explanation:

The best approach for recording an agreement with a specialist once the scope of work has been determined by the auditors is to use a formal engagement letter. This document should outline the responsibilities, scope, and expectations from both the auditors and the specialist, and provide a clear framework for the services to be provided. Compared to verbal agreements, which can be subject to misunderstandings and lack documentation, a formal engagement letter ensures that a legally binding understanding is established. Recording the agreement in the audit planning documents is also essential, but it serves as an internal control rather than a formal agreement with the specialist.