A CPA has been asked to audit the financial statements of a company for the first time. All preliminary verbal discussions and inquiries have been completed between the CPA, the company, the predecessor auditor, and all other necessary parties. The CPA is now preparing an engagement letter. Required:

a. List the items that should be included in the typical engagement letter in these circumstances.

b. Describe the benefits derived from preparing an engagement letter.

c. Who should prepare and sign the engagement letter?

d. When should the engagement letter be sent?

e. Why should the engagement letter be renewed periodically?