Final answer:
The understanding between an auditor and a client regarding the auditor's responsibility for discovering illegal acts is typically outlined in an engagement letter. This document clarifies the scope and nature of the audit, preventing misunderstandings.
Step-by-step explanation:
A written understanding between the auditor and the client concerning the auditor's responsibility for the discovery of illegal acts is usually set forth in a engagement letter
. The engagement letter defines the scope of the audit engagement, including the objectives and limitations of the audit, the responsibilities of management, and the communication between auditors and management.
It's crucial because it helps prevent misunderstandings between the auditor and the client regarding the audit process and outcomes.
correct option D. Engagement letter.