A Direct Line Blog

By Donya Parrish, MCU VP- Risk Management

When your supervisory committee looks to enter into a relationship with an external party for audits, there is an important and necessary step in the process — the engagement letter! Whether it is annually, or every few years, having the basic expectations laid out before the start of the audit is a key piece to the relationship.

You might be thinking, “That sounds great, but where do we find one?” You’re in luck! Our partners at CU PolicyPro have provided this example letter for you to customize and use. It includes the terms of an engagement letter noted by the NCUA in Part 715.9(b) and helps both parties — the auditor and the supervisory committee — enter the relationship with the details necessary for success.

In addition to noting the scope and procedures to be performed, the sample letter also lays out any charges, the expected number of hours to complete the review, when an audit report is expected, and it also reiterates the confidential nature of the information provided and seen during the review. It also includes some basic language that the audit, “will not entail a detailed examination of all transactions and cannot be relied upon to identify internal control reportable conditions, irregularities, or illegal acts.”

The sample has directions for customizing it to your own credit union’s needs and can be a good resource for adjusting your own template, or starting fresh as you enter into your next audit engagement. Your auditor may also come with their own engagement letter, and that is fine, too, as long as you review it carefully to ensure all necessary provisions to protect the credit union are included.