The use of an audit engagement letter is the best method of assuring the auditor will have which of the following?
Options:
| a) Auditor will obtain sufficient appropriate audit evidence. b) Management representation letter c) Access to all books, accounts and vouchers required for audit purpose d) Cooperation from other auditors |
The Correct Answer Is:
c) Access to all books, accounts and vouchers required for audit purpose
Correct Answer Explanation: c) Access to all books, accounts and vouchers required for audit purpose
An audit engagement letter serves as a crucial document in establishing the terms of engagement between the auditor and the client. The correct answer, “c) Access to all books, accounts, and vouchers required for audit purposes,” aligns with the fundamental purpose of an audit engagement letter.
This letter outlines the scope of the audit, the responsibilities of both parties, and crucially, it emphasizes the necessity for the auditor to have unrestricted access to all pertinent documentation and records necessary to conduct a thorough and effective audit.
The access to books, accounts, and vouchers is paramount for an auditor to gather the necessary evidence and perform a comprehensive examination of the financial statements.
Without unrestricted access to these records, the auditor’s ability to obtain sufficient appropriate audit evidence would be compromised, potentially hindering the audit process and impeding their ability to render an accurate opinion on the financial statements.
Why the other options are Incorrect?
Let’s explore why the other options—option (a) Auditor will obtain sufficient appropriate audit evidence, option (b) Management representation letter, and option (d) Cooperation from other auditors—are not the best methods assured by an audit engagement letter.
(a) Auditor will obtain sufficient appropriate audit evidence:
While the ultimate goal of an audit is to obtain sufficient and appropriate evidence to form an opinion, the engagement letter itself does not directly ensure this. Rather, it sets the stage for the auditor to gain access to the necessary documentation and processes that enable the acquisition of this evidence.
Without access to relevant records (as assured by the engagement letter), obtaining sufficient appropriate audit evidence becomes challenging.
(b) Management representation letter:
The management representation letter is a document where management acknowledges its responsibilities in preparing the financial statements and represents that they have provided all necessary information to the auditor.
While important, this letter is separate from the engagement letter and serves a different purpose. It is not the primary means by which the auditor gains access to records; rather, it addresses management’s assertions about the information provided.
(d) Cooperation from other auditors:
An audit engagement letter primarily establishes the relationship between the auditor and the client. While cooperation from other auditors might be necessary in certain cases, this is not explicitly assured by the audit engagement letter.
Collaboration with other auditors would depend on specific circumstances and professional relationships but is not directly addressed or assured through the engagement letter itself.
In summary, while an audit engagement letter does not guarantee the successful completion of an audit, it is instrumental in defining the terms and conditions of the audit engagement.
The assurance of access to all books, accounts, and vouchers required for audit purposes is crucial as it directly facilitates the auditor’s ability to gather the necessary evidence, conduct a thorough examination, and ultimately provide an opinion on the financial statements.
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