Area 1: Ethics — CPA Practice Question 04

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Recall the mandatory contents of an engagement letter (AU-C 210). Focus on the limitations of the audit.

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B.A statement that because of the inherent limitations of an audit, together with the inherent limitations of internal control, an unavoidable risk exists that some material misstatements may not be detected.✓ Correct

AU-C 210 requires the engagement letter to include the objective and scope of the audit, responsibilities of the auditor, responsibilities of management, and a statement about the inherent limitations of an audit and internal control (unavoidable risk).

Common mistakes

Thinking the engagement letter includes the detailed audit program or guarantees of fraud detection.

An auditor is establishing an understanding with a client regarding the services to be performed for a non-issuer. Which of the following must be included in the engagement letter?

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Practice the full CPA AUD Practice Exam

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