Definition of Engagement Letter

A letter of engagement is written by an audit firm about the formal acceptance of the audit engagement and also some important matters related to engagement. First of all, it describes the purpose of the engagement. It can be an audit engagement or other assignments. Further, it also tells about the nature timing and extent of work, related standards and framework, and type of report that is to be formed.


Another important matter is a fee that is discussed based on the nature of the engagement. In case of any disputes how the firm may intend to resolve the issue is also discussed. As a result of any unresolved dispute, the limitation on the liability of the audit firm is also discussed.



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