What is the primary purpose of an 'Engagement Letter' in an audit?

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SSC Audit Tax Finance P-II QUESTION #6224

Question 1

To list all the frauds found during the initial planning
To formalize the agreement and define the contract to minimize legal liabilities✔️
To replace the Auditor's Report at the end of the year
To provide the SECP with the audit fee details

Correct Answer Explanation

An engagement letter defines the contract, services, fee, and timing, which helps formalize the agreement and minimize potential liabilities.