Engagement Letter

Posted By: biz

Engagement Letter - 11/06/07 09:40 PM

Perhaps someone can explain this to me. I have an engagement letter in front of me, which is addressed to the Audit Committee. In the area describing the responsibilities of the auditor, it says. "We will provide services as requested by your representatives, Mr. Jones (President) and Mrs. Smith. Bank authorizes us to accept instruction from your representatives and we may rely on their instructions as being that of the Bank."

This is all fine and dandy except Mr. Jones is not a representative of the Audit Committee. Is there not a conflict of interest with Mr. Jones being named by the audit firm (not by AC)-as a rep of the AC.

Posted By: RR Sarah

Re: Engagement Letter - 11/06/07 09:57 PM

It sounds to me like Mr. Jones and Mrs. Smith prepared the bid request? Also, it sounds as if Mr. Jones will be representing the bank and not specifically the Audit Committee. It is hard to tell without more information. Are you the Internal Auditor?
Posted By: biz

Re: Engagement Letter - 11/06/07 10:16 PM

Yes, and before I raised a stink with Xternal auditors, I wanted to make sure I was justified. Not liking that open mouth, input foot stuff. Mr. Jones, in my opinion should be not be involved with or named in the engagement letter as a go to person.

But in the meantime the AC chair called me back and he doesn't like it either. so it is being removed. Thanks for your comment.
Posted By: rlcarey

Re: Engagement Letter - 11/07/07 01:36 AM

It is not uncommon for an engagement letter for internal audits to name a representative of the bank to guide the day-to-day effort. The engagement letter should have already lined out the basic principles of the audit and the auditors just want clear guidance on the senior managment "go to" people so that they do not have to call a director for every little thing. If the auditing firm is good, they are not going to let manangement sway or determine the actual scope of the audit or the results.