If you have an existing multiple year audit engagement letter (e.g., letter covering 2011, 2012 and 2013), should you get a new letter to cover the requirements of the Clarity Project?
Yes (or at least create an addendum to your original letter).
Personally I prefer to create a new engagement letter. That way I know I’ve covered all the requisite elements of the new Clarity standards.
It’s cumbersome to create an addendum to the original engagement letter. In order to do so, you will need to compare your old letter with the new engagement letter from your audit materials provider (e.g. PPC, McGladrey, CCH) or the suggested language in the audit standards themselves; then you’ll need to craft an addendum sufficient for that particular client. It’s cleaner to create a new engagement letter. (I previously provided one example of a new engagement letter change.)
Either way, you will need to provide a full letter or addendum to the client.
New Requirement for Multiple Year Engagement Letters
And while we are talking about multiple year engagement letters, remember that under the Clarity standards certain communications are required for recurring audits. The auditor must assess whether circumstances require the terms of the audit engagement to be revised. If the auditor concludes that the terms of the engagement need not be revised, the auditor should remind the entity of the terms of the engagement by (1) providing a new engagement letter or (2) providing a reminder, either written or oral, that the responsibilities outlined in the previous letter still apply. AU-C section 210 requires that the reminder, whether written or oral, be documented. Standards prior to the Clarity Project did not require the reminder.