[The following paragraph is effective on December 15, 2025. See PCAOB Release No. 2024-005.The paragraph effective before December 15, 2025 can be found here.]

.46       The practitioner should establish an understanding with the client regarding the services to be performed for each engagement.^fn10 Such an understanding reduces the risk that either the practitioner or the client may misinterpret the needs or expectations of the other party. For example, it reduces the risk that the client may inappropriately rely on the practitioner to protect the entity against certain risks or to perform certain functions that are the client's responsibility. The understanding should include the objectives of the engagement, management's responsibilities, the practitioner's responsibilities, and limitations of the engagement. The practitioner should document the understanding in the working papers, preferably through a written communication with the client. If the practitioner believes an understanding with the client has not been established, he or she should decline to accept or perform the engagement.