In this lesson, Nick Palazzolo, CPA, discusses the engagement letter, which serves as the contract between the auditor and the client. He emphasizes that this is a crucial step to reduce the risk of misunderstandings and to set clear expectations for both parties. The lesson covers essential components of an engagement letter, such as outlining responsibilities, fee and billing conditions, and providing reasonable assurance. He also cautions about the importance of avoiding contingent fees that could impair independence. Furthermore, the lesson includes a sample engagement letter to illustrate its structure, and he highlights how important it is for clients to fully understand the terms and conditions within the engagement process.
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