It is in the interests of both the entity and the auditor that the auditor sends an audit engagement letter before the commencement of the audit to help avoid misunderstandings with respect to the audit.

An engagement letter is drafted by the company rendering the service, often with the help of a lawyer. It is than presented to the client, and both parties must sign in order for it to be legally binding.

For an engagement letter to be binding, there must be agreement to the terms on both sides. The engagement letter is drafted and, in most cases, signed by the firm, therefore there is clear evidence of the agreement of the contents of the letter on the firm's side.

The service provider typically prepares the Letter of Engagement, be it a law firm, accounting agency, consultancy, or any professional offering services.

What Is an Engagement Letter? An engagement letter is a written agreement that describes the business relationship to be entered into by a client and a company. The letter details the scope of the agreement, its terms, and costs. The purpose of an engagement letter is to set expectations on both sides of the agreement.

An appraisal engagement letter is a legally binding document that defines the terms and conditions of your arrangement with your client, addresses the scope of the assignment, and establishes your compensation.