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The Engagement Letter For Tax Audit is a mandatory professional document required when businesses in India meeting certain turnover thresholds engage Chartered Accountants for statutory tax audits. This requirement stems from Section 44AB of the Income Tax Act, 1961, which mandates tax audits for businesses exceeding specified turnover limits (currently INR 1 crore for businesses and INR 50 lakhs for professionals). The letter establishes the framework for the audit relationship, including scope, responsibilities, and deliverables, while ensuring compliance with ICAI guidelines and professional standards. It serves as a crucial document that protects both the audit firm and the client by clearly documenting the terms of engagement, limitations, and expectations before the commencement of the tax audit.

1. Letter Header and Date: Firm's letterhead, date, and client's address

2. Salutation and Introduction: Formal greeting and confirmation of engagement request

3. Scope of Services: Detailed description of tax audit services to be provided under Section 44AB

4. Audit Objectives: Clear statement of the purpose and objectives of the tax audit engagement

5. Management's Responsibilities: Client's responsibilities including maintaining records and providing information

6. Auditor's Responsibilities: Firm's responsibilities and limitations of the tax audit engagement

7. Timeline and Reporting: Expected completion dates and format of deliverables (Forms 3CA/3CB and 3CD)

8. Professional Fees: Fee structure, payment terms, and out-of-pocket expenses

9. Confidentiality: Commitment to maintain confidentiality of client information

10. Limitation of Liability: Limits of the firm's liability in performing the engagement

11. Acceptance and Acknowledgment: Request for client's acceptance and space for signatures