The agreement between an auditor and client is a crucial aspect of the audit process. This document outlines the scope of the audit, lists the responsibilities of both parties, and sets forth reporting requirements, fee structure, and confidentiality provisions. It also acts as a legal record of the relationship between the parties. It is used by a variety of businesses including tax, accounting, and consulting companies.
It is possible for clients to have cooperative relationships with their auditors and yet remain at arm’s length as required by the audit standards. However, prior literature indicates that some auditors acquiesce to client demands because of their fear of a loss of the business before recovering costs invested in the audit (DeAngelo 1981). Other reasons for acquiescence to clients include a desire to please them and not risk losing them before they can recuperate their start-up cost investment (Krishnan & Stephens 1996).
During the negotiation of an agreement between an auditor and a client, differences might occur over the interpretation of complicated and imprecise accounting procedures. These disagreements might get resolved through a process of mutually beneficial negotiations that involve the use of acquiescence strategies. These acquiescence strategies might be motivated by the fear of losing the business before the auditor can recover start-up costs or by a desire to appear professional to the clients and peers (Nelson et al. 2002).
An engagement letter clarifies a client’s responsibilities, limits the scope of an audit, and defines the terms of a contract. Use Jotform Sign’s free Audit Engagement Letter Template to quickly describe the responsibilities of both parties, outline reporting requirements and fees, and communicate other terms and conditions. It can be signed by both the client and the auditor for easy verification of the terms and conditions. agreement between auditor and client