Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

When performing an audit, what form of understanding with a client is acceptable?

1. Only a written understanding

2. Either an oral or a written understanding

3. An oral understanding referenced in documentation

4. There is no requirement for an understanding

The correct answer is: There is no requirement for an understanding

During an audit, establishing an understanding with a client is of significant importance for ensuring clear communication of expectations and limitations. While it is highly recommended to document this understanding in writing, the options available for how this understanding is formed can vary. The correct answer reflects that there is no stringent requirement mandating that this understanding be formalized in a specific manner. This means that an auditor can initiate an oral understanding with a client if desired. While documenting the understanding is ideal for clarity and future reference, the lack of a requirement does allow for flexibility in how auditors and clients communicate their expectations. In practice, auditors often choose to document critical aspects of their understanding—such as the scope of the audit, objectives, and management responsibilities—either through written agreements or reports to facilitate a mutual understanding and accountability. However, this option recognizes that, at a fundamental level, an understanding does not need to be formally written to be acceptable in an auditing context.