Question

An engagement letter is best described as which of the following?

A) A letter from company management to the auditors specifying management's expectations for completion of the audit on a timely basis and the fees.
B) A letter from the auditors to company management specifying that management is responsible for the financial statements, and the auditors will issue an opinion on the financial statements.
C) A letter from the auditors to company management that specifies the responsibilities of both the company and the auditors in completing the audit and the timing for its completion.
D) A letter from the Board of Directors' audit committee to the auditor that indicates the auditor has been engaged to perform the audit and the fees to be paid.

Answer 1

An engagement letter is a letter from the auditors to company management that specifies the responsibilities of both parties in completing the audit and the expected timeline for completion. Correct option is C.

Step-by-step explanation:

An engagement letter is best described as option C) A letter from the auditors to company management that specifies the responsibilities of both the company and the auditors in completing the audit and the timing for its completion.

The engagement letter is a formal agreement between the auditors and the company management that outlines the scope of the audit, the responsibilities of both parties, and the expected timeline for completion. It ensures that both parties have a clear understanding of the audit process and helps to establish expectations.

For example, the engagement letter may specify that the auditors will receive access to the company's financial records, and that the company will provide necessary support and information. It may also outline any specific areas or transactions that the auditors should focus on during the audit.