Video: Introduction to Terms of Engagement, Engagement Acceptance, and Engagement Letter

This lesson highlights the process of accepting an engagement, discussing the terms, and creating the engagement letter. It covers the origins of the engagement, the process of the client and practitioner finding and assessing each other for compatibility, and the significance of confirming there are no reasons to stop the engagement. Additionally, the lesson delves into common reasons not to conduct an engagement, understanding the work to be performed, and the responsibilities of each party in the agreement. The objective of the auditor and the preconditions for an audit are also discussed, emphasizing the importance of a common understanding of the terms and responsibilities involved in the engagement.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Let's dive right in to our accepting an engagement, the terms of it, the original contract, which is the engagement letter. We're getting into an agreement with the client. And what does that involve? Well, here we're gonna cover the origins of the engagement. And it's a process. Oh, just like life. Life is a process, right? Well, first off, the client and practitioner have to find each other. Well, matchmaker, you know, they go on their dating apps, try to find each other. Then they see if they're a good match for each other. You know, that does involve, okay, are we independent? Can we actually do this engagement? That's what we mean by that. Confirming that there are no reasons to call off the engagement. Are we not independent? Do we have absolutely no idea how to do this engagement? Are we understaffed? Many reasons to not conduct an engagement. We'll discuss those much more as well. Coming to an understanding on the work to be performed. So if they want you to do something and you don't want to do that for whatever reason, then unfortunately we're gonna have to call it off. And then agreeing on an engagement letter. And this is the hammered out in writing on paper, what we're doing, responsibilities that each party has. And that's what we're gonna go through in this lesson. The objective of the auditor, it's to accept an audit engagement for a new or existing audit client only when the basis upon which it is to be performed has been agreed upon through. And as another note, I say this in most lessons, this applies not just to audits, it applies to most engagements as well. And I'm gonna use it interchangeably, right? This is the audit exam.

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Terms of an Engagement

Module: 3 Concepts, 34 Videos

Professional Standards in Audit & Non-audit Engagements Overview

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Professional Standards in Audit & Non-audit Engagements Objectives

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Introduction to Professional Standards in Audit and Non-Audit Engagements

1:00

Terminology in Professional Standards