Engagement letter

Meaning: An engagement letter records the agreed terms of the audit between the auditor and the client.

ISA 210 requires the agreed terms to be documented in an engagement letter or another suitable written agreement, subject to limited exceptions where legislation sufficiently prescribes those terms. mia.org.my

Main content	Explanation	Example
Objective and scope	Identifies the purpose and coverage of the audit.	Audit of the financial statements for the year ended 31 December 2026.
Auditor’s responsibilities	Explains the auditor’s role in obtaining reasonable assurance and expressing an opinion.	Perform audit procedures and issue an independent auditor’s report.
Management’s responsibilities	Explains management’s responsibility for preparation, internal control and access to information.	Prepare the financial statements and provide complete accounting records.
Applicable reporting framework	Identifies the framework used to prepare the financial statements.	MFRS or MPERS, as applicable.
Expected report	Describes the expected form and content, while acknowledging that circumstances may require a different report.	The opinion may be modified if a material issue remains unresolved.
Other practical arrangements	May cover fees, timing and communication arrangements.	Agreed fee basis and planned completion date.

The first five areas reflect the principal terms required by ISA 210; practical arrangements may also be included. mia.org.my

Example: Management expects the auditor to prepare the accounts and guarantee that every fraud will be detected. The engagement letter clarifies the respective responsibilities and the limitations of an audit, helping prevent this misunderstanding.

Student takeaway: The engagement letter explains what both parties agree to do. It can form the contract governing their relationship, subject to applicable law.