Preliminary Arrangements Agreed to by the Auditors and the Client

question 58

Multiple Choice

Preliminary arrangements agreed to by the auditors and the client should be reduced to writing by the auditors. The best place to set forth these arrangements is in:

• A) A memorandum to be placed in the permanent section of the auditing working papers.
• B) An engagement letter.
• C) A client representation letter.
• D) A confirmation letter attached to the constructive services letter.

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Definitions:

Economizing Problem

The issue of limited resources to meet unlimited wants, necessitating choices and prioritizations in the use of resources.

Limited Resources

The finite availability of inputs or resources (labor, capital, land) that can be used for the production of goods and services.

Unlimited Wants

The economic concept that human desires and needs are constant and infinite, whereas the resources to fulfill them are limited.

Best Use

Optimal allocation or application of resources to maximize efficiency or value.