| A24. | The form and content of the audit engagement letter may vary for each entity. Information included in the audit engagement letter on the auditor's responsibilities may be based on ISA (UK) 200 (Revised June 2016).17 Paragraphs 6(b) and 12 of this ISA (UK) deal with the description of the responsibilities of management. In addition to including the matters required by paragraph 10, an audit engagement letter may make reference to, for example: |
| Elaboration of the scope of the audit, including reference to applicable legislation, regulations, ISAs (UK), and ethical and other pronouncements of professional bodies to which the auditor adheres. |
| The form of any other communication of results of the audit engagement. |
| The requirement for the auditor to communicate key audit matters in the auditor's report in accordance with ISA (UK) 701.18 |
| The fact that because of the inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that some material misstatements may not be detected, even though the audit is properly planned and performed in accordance with ISAs (UK). |
| Arrangements regarding the planning and performance of the audit, including the composition of the audit team. |
| The expectation that management will provide written representations (see also paragraph A13). |
| The expectation that management will provide access to all information of which management is aware that is relevant to the preparation of the financial statements, including an expectation that management will provide access to information relevant to disclosures. |
| The agreement of management to make available to the auditor draft financial statements, including all information relevant to their preparation, whether obtained from within or outside of the general and subsidiary ledgers (including all information relevant to the preparation of disclosures), and the other information,19 if any, in time to allow the auditor to complete the audit in accordance with the proposed timetable. |
| The agreement of management to inform the auditor of facts that may affect the financial statements, of which management may become aware during the period from the date of the auditor's report to the date the financial statements are issued. |
| The basis on which fees are computed and any billing arrangements. |
| A request for management to acknowledge receipt of the audit engagement letter and to agree to the terms of the engagement outlined therein. |
| A25. | When the auditor is not required to communicate key audit matters, it may be helpful for the auditor to make reference in the terms of the audit engagement to the possibility of communicating key audit matters in the auditor's report and, in certain jurisdictions, it may be necessary for the auditor to include a reference to such possibility in order to retain the ability to do so. |
| A26. | When relevant, the following points could also be made in the audit engagement letter: |
| Arrangements concerning the involvement of other auditors and experts in some aspects of the audit. |
| Arrangements concerning the involvement of internal auditors and other staff of the entity. |
| Arrangements to be made with the predecessor auditor, if any, in the case of an initial audit. |
| A reference to, and description of, the auditor's responsibilities under law, regulation or relevant ethical requirements that address reporting identified or suspected non-compliance with laws and regulations to an appropriate authority outside the entity. |
| Any restriction of the auditor's liability when such possibility exists. |
| A reference to any further agreements between the auditor and the entity. |
| Any obligations to provide audit working papers to other parties. |
| An example of an audit engagement letter is set out in Appendix 1.19a |
| 17 ISA (UK) 200 (Revised June 2016), paragraphs 3-9. |
| 18 ISA (UK) 701, Communicating Key Audit Matters in the Independent Auditor's Report. |
| 19 As defined in ISA (UK) 720 (Revised June 2016), The Auditor's Responsibilities Relating to Other Information. |
| 19a The example letter in Appendix 1 has not been tailored for the UK. |
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