Section 3: Terms of engagement

The revised professional practice standard relating to the engagement letter, approved by the Minister of Justice, is shown below:

NEP 210. Engagement letter

Introduction

1. Legal and regulatory provisions provide for the statutory audit engagement in certain persons or entities. In addition, interventions other than the statutory audit are expressly and exclusively required of the statutory auditor of the person or entity by legal or regulatory provisions or by provisions of European Union law having direct effect in national law.

The statutory audit engagement and these other engagements are referred to as an "engagement" in this standard.

The statutory auditor defines the terms of the engagement in an engagement letter.

2. The purpose of this standard is to define the principles to be followed by the statutory auditor in drawing up this engagement letter and requesting the agreement of the person or entity on its content.

Drafting the engagement letter

3. The engagement letter is drawn up by the statutory auditor during the first year of his mandate and communicated to the person or entity prior to the implementation of his audit and control work.

4. In the event that the engagement is entrusted to several statutory auditors, the latter shall draw up either a joint engagement letter or individual engagement letters, after exchanging information among themselves.

5. Where the statutory auditor of a person or entity that prepares consolidated or combined accounts is also the statutory auditor of one or more persons or entities in the same group, he shall assess whether it is appropriate to draw up a joint engagement letter for several of these persons or entities.

Where the statutory auditor chooses to draw up a joint engagement letter, he shall ask the parent person or entity to confirm to him in writing that the persons or entities in the group have agreed to the content of the engagement letter as far as they are concerned.

Contents of the engagement letter

6. Without prejudice to any contractual commitments or other elements relating to the particularities of the person or entity that the statutory auditor may deem useful to add, the engagement letter shall include the following elements:

the objective and scope of the statutory audit and other engagements whose performance is known at the time the engagement letter is drawn up and which the statutory auditor intends to carry out pursuant to legal and regulatory provisions;

the statement that other engagements required by legal or regulatory provisions are likely to be carried out depending on the circumstances or the occurrence of events affecting the person or entity;

the engagement timetable ;

where applicable, the division of work between the joint statutory auditors;

the names of the signatories;

any recourse, under the responsibility of the statutory auditor, to external collaborators and/or experts for the performance of certain tasks;

where applicable, a statement that certification of the consolidated financial statements is issued after examination of the work of the professionals responsible for auditing the financial statements of the persons and entities included in the consolidation, in accordance with the provisions of Article L. 823-9 of the French Commercial Code;

the duty of the person or entity to provide the statutory auditor with the information and documents required by law and regulations;

the need to make available to the statutory auditor any document, supporting evidence or other information requested as part of its work;

-the need to allow the statutory auditor free access to natural persons within the person or entity as well as to third parties mentioned in Article L. 823-14 of the French Commercial Code, from whom the statutory auditor considers it necessary to gather information;

the request for written confirmation from the legal representative of the person or entity with regard to the statements made to the statutory auditor necessary for its engagement;

the reminder of the obligation to communicate with the bodies mentioned in Article L. 823-16 of the French Commercial Code;

the fee budget for the statutory audit engagement and other engagements whose completion is known at the time the engagement letter is drawn up, as well as, where applicable, the breakdown of this budget between the joint statutory auditors, and the terms of invoicing.

Revision of the engagement letter

7. During its term of office, when circumstances lead to significant changes in the terms of its engagement, the statutory auditor shall revise the content of the engagement letter. Such circumstances may include:

particular difficulties encountered in the implementation of its work;

changes in management or ownership;

changes in the nature, size, organisation or location of the activities of the person or entity;

the occurrence of an event or circumstances requiring additional due diligence;

clarifications to be provided to management on the objective and/or scope of the engagement.

In this case, either a revised engagement letter is drawn up to replace the previous one, or an amendment to the engagement letter is drawn up.

Request for agreement

8. The statutory auditor asks the person or entity to acknowledge receipt of the initial engagement letter and to confirm its agreement to the terms set out.

He records any disagreement in his file.

Where the disagreement calls into question the proper conduct of the engagement, the statutory auditor shall apply the measures intended to remedy the situation in accordance with the legal and regulatory provisions and, where applicable, shall draw all the consequences thereof on the expression of his opinion or the formulation of his conclusions as well as on the continuation of his mandate with the person or entity concerned.

The same principles apply to the revised engagement letter or endorsement referred to in paragraph 7.