When a company has to go through the audit process, an auditor may use the term "audit engagement." This can mean different things, so it is important that the auditor clarifies what he means when he uses the term. Regardless of which definition the auditor follows, the auditor will always follows specific procedures and guidelines for handling the engagement. An audit engagement very loosely refers to an audit that an auditor performs. More specifically, it refers only to the initial stage of an audit during which the auditor notifies the client he has accepted the audit work and clarifies his understanding of the audit's purpose and scope. Even more specifically, the term audit engagement can refer to the written letter by which the auditor formally notifies the client that he will engage in audit services. You are required to discuss the three steps that are involved in performing the engagement during an audit.

(10 Marks)