The engagement letter:
A) can be used to alter the auditor's responsibilities under Australian auditing standards.
B) is useful only if it is an audit engagement, but has no effect for review or compilation services.
C) can affect legal responsibilities to the client.
D) affects the audit firm's responsibility to external users of audited financial statements.

Question

Quizplus · Accepted Answer

The engagement letter can affect legal responsibilities to the client. It outlines the terms of the engagement, including the nature of the services to be provided, the responsibilities of both the auditor and the client, and the scope and limitations of the engagement. This can create legal obligations and expectations for both parties, and therefore can affect legal responsibilities to the client. Choices A, B, and D are incorrect as they do not accurately reflect the purpose and impact of the engagement letter.

The Engagement Letter