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gigglejazz
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| Posted: 13 Jun 2012 at 14:47 | IP Logged
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Hello everyone, I am confused with the answer of this MC question. I chose C but the answer is D. Please give me your opinion. Thanks!
Here's the explanation: The independent auditor is required to create written documentation that includes specified information about an upcoming audit engagement to ensure that both parties understand the nature of the work to be performed, the assurance to be given, and the responsibilities of both parties. However, no specific format (such as a contract or an engagement letter) is required. Any form, as long as the needed information is included, will suffice. Often, an engagement letter or a contract is used for this purpose but neither form of documentation is required.
Question:
Jackson, CPA has been offered the job of auditing Benton and Lutz, a manufacturing company. After proper consideration was made, Jackson has decided to accept the engagement. In what form should the understanding that has been reached between the two parties be documented?
A A contract should be written by the auditor and signed by both parties.
B A contract should be written by the client and signed by both parties.
C An engagement letter should be written by the auditor and furnished to the client.
D Written documentation should be created by the auditor and furnished to the client.
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Scmang3
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| Posted: 03 Jul 2012 at 16:22 | IP Logged
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Yeah, I agree with D. Engagement letter is presumptive
mandatory, but not required. Written documentation is
required!
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wool1
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| Posted: 25 Jul 2012 at 16:10 | IP Logged
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An engagement letter is not required and neither is a contract (isn't the engagement letter a contract?), but some general written documentation is? I'd like to see what this documentation that isn't an engagement letter or a contract might look like.
I don't remember reading anywhere in my book (Whittington/Pany) that "written documentation" is required. So that's weird.
Also, the book says engagement letters "do not follow any standard form." Doesn't that mean even if it doesn't look like a formal letter, if it states the purposes of the engagement and other relevant information that "written documentation" should, it serves as the engagement letter/contract, making the "engagement letter/contract and "written documentation" one and the same?
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wool1
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| Posted: 25 Jul 2012 at 16:44 | IP Logged
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But I can see why the authorities make a distinction between engagement letter, contract and "written documentation." What's important to be documented is not the signature(s) (as generally a contract would require), is not the name and address of a/both parties (as there probably would be in an engagement letter); but simply the understanding between the two parties that the engagement is one of assurance rather than nonassurance or vice versa.
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Topic: Engagement Letter required or not
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