A CPA has been asked to audit the financial statements of a publicly held company for the first time. All preliminary verbal discussions and inquiries among the CPA, the company, the predecessor auditor, and all other necessary parties have been completed. The CPA is now preparing an engagement letter. Required:

a. List the items that should be included in the typical engagement letter in these circumstances.

b. Describe the benefits derived from preparing an engagement letter. (AICPA, adapted)