An agreement between an auditor and client is a contract that specifies the auditing services to be performed, how long they are expected to take, and outlines billing arrangements and confidentiality provisions. It can also be used to establish boundaries to prevent scope creep which is the expansion of an audit beyond its predetermined boundaries. An auditor may agree to perform additional services if they are deemed necessary.
Studies that have compared auditor and management negotiation decisions under the same negotiation context have revealed that clients are more flexible than auditors (Defond & Jiambalvo, 1993). This is partly because auditing standards can be complex and imprecise; and managers might interpret these standards as requiring them to compromise in their negotiations with auditors.
Another reason for acquiescence to client requests is that auditors might not want to lose the client before they can recuperate their start-up costs (Shafer et al., 2004).
An audit engagement letter is a document that describes the limits of an auditor’s work and outlines reporting requirements. It is often drafted by an auditor and sent to the client before the audit begins. The letter typically lists the responsibilities of both parties, reports on the financial condition of the client, and the audit fees. It can also include confidentiality provisions and data protection regulations. Using a free Audit Engagement Letter Template from Jotform Sign, you can create a professional document for your auditing business and send it to any client with the click of a button. agreement between auditor and client