AI SYSTEM AUDIT ENGAGEMENT LETTER

DATE: [DATE]

ENGAGEMENT NUMBER: [ENGAGEMENT-NUMBER]

FROM (AUDITOR):

[AUDITOR FIRM NAME]
[ADDRESS]
[CITY, STATE/PROVINCE, POSTAL CODE, COUNTRY]

Contact: [NAME]
Email: [EMAIL]
Phone: [PHONE]

TO (CLIENT):

[CLIENT ORGANIZATION NAME]
[ADDRESS]
[CITY, STATE/PROVINCE, POSTAL CODE, COUNTRY]

Attention: [NAME, TITLE]
Email: [EMAIL]

RE: AI System Audit Engagement

Dear [NAME]:

This letter confirms the terms of our engagement to perform an audit of your artificial intelligence system(s) as described herein. Please review this letter carefully and indicate your acceptance by signing below.

1. ENGAGEMENT OVERVIEW

1.1 Purpose

[AUDITOR FIRM NAME] ("Auditor," "we," "us") will perform an independent audit of the artificial intelligence system(s) identified below ("AI System" or "System") owned and/or operated by [CLIENT ORGANIZATION NAME] ("Client," "you").

The purpose of this audit is to:

☐ Assess compliance with applicable AI regulations
☐ Evaluate algorithmic fairness and bias
☐ Review AI governance and documentation practices
☐ Assess security and privacy controls
☐ Evaluate model performance and accuracy
☐ Review human oversight mechanisms
☐ Assess training data practices
☐ Conduct pre-deployment conformity assessment
☐ Fulfill regulatory audit requirements
☐ Other: [SPECIFY]

1.2 AI System(s) in Scope

1.3 Engagement Period

• Engagement Start Date: [DATE]
• Fieldwork Period: [START DATE] to [END DATE]
• Draft Report Due: [DATE]
• Final Report Due: [DATE]

2. SCOPE OF AUDIT

2.1 Audit Components

This engagement will include the following components:

Regulatory Compliance Assessment

☐ EU AI Act Compliance
- Classification of AI System under EU AI Act risk categories
- Assessment of conformity with applicable requirements
- Review of technical documentation
- Evaluation of quality management system
- Assessment of human oversight mechanisms
- Review of transparency and disclosure practices

☐ US State Law Compliance
- Colorado AI Act requirements assessment
- California AI transparency law compliance
- Illinois employment AI law compliance
- NYC Local Law 144 compliance (if employment-related)
- Other applicable state laws: [SPECIFY]

☐ Sector-Specific Compliance
- [SPECIFY REGULATIONS: HIPAA, GLBA, FINRA, FDA, etc.]

Algorithmic Fairness and Bias Audit

☐ Bias Assessment
- Analysis of model outputs across demographic groups
- Calculation of fairness metrics (demographic parity, equalized odds, etc.)
- Assessment of disparate impact
- Review of protected class proxies
- Evaluation of bias mitigation measures

☐ Fairness Testing
- Testing with representative datasets
- Evaluation of edge cases and subgroup performance
- Analysis of intersectional fairness
- Documentation of fairness methodology and results

Technical Assessment

☐ Model Documentation Review
- Review of model cards and technical documentation
- Assessment of development lifecycle documentation
- Evaluation of training data documentation
- Review of validation and testing records

☐ Performance Evaluation
- Verification of stated accuracy metrics
- Assessment of model robustness
- Evaluation of error handling
- Review of performance monitoring mechanisms

☐ Training Data Assessment
- Review of data sources and provenance
- Assessment of data quality controls
- Evaluation of data representativeness
- Review of consent and rights documentation

Governance Assessment

☐ AI Governance Review
- Assessment of governance structures
- Review of policies and procedures
- Evaluation of roles and responsibilities
- Assessment of documentation practices

☐ Human Oversight Assessment
- Evaluation of human-in-the-loop mechanisms
- Assessment of override capabilities
- Review of escalation procedures
- Evaluation of training and competency

☐ Risk Management Review
- Assessment of risk identification processes
- Evaluation of risk mitigation measures
- Review of incident response procedures
- Assessment of monitoring and alerting

Security and Privacy Assessment

☐ Security Review
- Assessment of access controls
- Evaluation of data protection measures
- Review of adversarial attack protections
- Assessment of logging and audit trails

☐ Privacy Review
- Evaluation of privacy impact assessments
- Assessment of data minimization practices
- Review of consent mechanisms
- Assessment of data subject rights procedures

2.2 Audit Standards and Frameworks

This audit will be conducted in accordance with:

☐ IEEE 7003-2024 Standard for Algorithmic Bias Considerations
☐ ISO/IEC 42001:2023 AI Management System Requirements
☐ NIST AI Risk Management Framework (AI RMF)
☐ EU AI Act requirements (Regulation (EU) 2024/1689)
☐ ISACA AI Audit Framework
☐ AICPA SOC 2 Trust Services Criteria (for security aspects)
☐ [OTHER STANDARDS: SPECIFY]

2.3 Out of Scope

The following items are explicitly excluded from this engagement:

☐ AI systems not listed in Section 1.2
☐ Legal interpretation or legal advice
☐ Penetration testing (unless specifically included)
☐ Source code review (unless specifically included)
☐ Redesign or remediation of systems
☐ Ongoing monitoring services
☐ [OTHER EXCLUSIONS]

3. AUDIT METHODOLOGY

3.1 Approach

Our audit methodology will include:

Phase 1: Planning and Information Gathering
- Review of documentation and policies
- Interviews with key stakeholders
- Understanding of system architecture and data flows
- Development of detailed audit plan

Phase 2: Testing and Assessment
- Technical testing of AI systems
- Analysis of model outputs and fairness metrics
- Review of controls and procedures
- Evaluation of compliance with requirements

Phase 3: Analysis and Reporting
- Analysis of findings
- Development of recommendations
- Preparation of draft report
- Discussion of findings with Client
- Issuance of final report

3.2 Testing Methodology

For bias and fairness testing, we will:

☐ Use Client-provided test datasets
☐ Develop independent test datasets
☐ Use both Client-provided and independent datasets
☐ Apply [SPECIFY TESTING METHODOLOGY]

Testing will assess:

3.3 Sampling

Where complete testing is not feasible, we will employ:

• Statistical sampling methods
• Risk-based sampling approaches
• Sample sizes sufficient for meaningful conclusions

Sampling methodology will be documented in our workpapers.

4. CLIENT RESPONSIBILITIES

4.1 Access and Cooperation

Client agrees to provide:

☐ Access to AI system(s) and development environments
☐ Access to training data and test datasets
☐ Model documentation and technical specifications
☐ Governance policies and procedures
☐ Prior audit reports and assessments
☐ Access to relevant personnel for interviews
☐ Responses to information requests within [DAYS] business days
☐ Designated point of contact for the engagement
☐ Test environment access (if applicable)
☐ API access for automated testing (if applicable)

4.2 Information Request

Please provide the following documentation within [DAYS] of engagement acceptance:

System Documentation:
☐ System architecture diagrams
☐ Model cards or technical documentation
☐ Training data documentation
☐ Validation and testing records
☐ Performance metrics and monitoring data

Governance Documentation:
☐ AI policies and procedures
☐ Risk assessments
☐ Impact assessments
☐ Governance committee records
☐ Incident reports

Compliance Documentation:
☐ Regulatory filings and disclosures
☐ Previous audit reports
☐ Remediation plans and status

4.3 Personnel Availability

Client will make the following personnel available for interviews:

4.4 Representations

Client represents that:

• Information provided to Auditor will be accurate and complete
• Client will promptly notify Auditor of any material changes
• Client has authority to engage Auditor for this purpose
• Client will not interfere with audit activities

5. DELIVERABLES

5.1 Audit Report

Upon completion of the audit, Auditor will deliver:

Executive Summary Report including:
- Audit objectives and scope
- Summary of methodology
- Key findings and risk ratings
- Summary of recommendations
- Overall assessment/opinion

Detailed Technical Report including:
- Detailed findings with supporting evidence
- Regulatory compliance assessment
- Bias and fairness analysis results
- Technical assessment results
- Governance assessment results
- Prioritized recommendations
- Remediation guidance

5.2 Supporting Materials

☐ Fairness testing results and methodology
☐ Compliance checklist/matrix
☐ Risk rating matrix
☐ Remediation roadmap
☐ Presentation to management/board
☐ Attestation letter (if applicable)
☐ Certification statement (if applicable)

5.3 Report Ratings

Findings will be rated using the following scale:

5.4 Draft Report Review

• Draft report will be provided to Client by [DATE]
• Client will have [DAYS] to review and provide feedback
• Auditor will consider Client feedback and factual corrections
• Final report will be issued within [DAYS] of receiving Client feedback

6. FEES AND EXPENSES

6.1 Professional Fees

☐ Fixed Fee Engagement: Total fee of $[AMOUNT] payable as follows:
- [%] upon engagement acceptance
- [%] upon completion of fieldwork
- [%] upon delivery of final report

☐ Time and Materials: Billed at standard hourly rates:
- Partner: $[RATE]/hour
- Senior Manager: $[RATE]/hour
- Manager: $[RATE]/hour
- Senior Associate: $[RATE]/hour
- Associate: $[RATE]/hour

Estimated total: $[AMOUNT] (actual fees may vary)

6.2 Expenses

Reasonable out-of-pocket expenses will be billed at cost:
☐ Travel expenses (if on-site work required)
☐ Specialized tools or software licensing
☐ Third-party data or testing services

Estimated expenses: $[AMOUNT]

Expenses exceeding $[THRESHOLD] require prior approval.

6.3 Payment Terms

• Invoices due within [NUMBER] days of receipt
• Late payments subject to [%] monthly interest
• Client responsible for applicable taxes

6.4 Additional Services

Services beyond the scope of this engagement will be subject to separate agreement or change order.

7. CONFIDENTIALITY

7.1 Confidential Information

Auditor agrees to maintain the confidentiality of all non-public information received from Client in connection with this engagement ("Confidential Information").

7.2 Use of Information

Auditor will use Confidential Information solely for purposes of performing this engagement and will not disclose it to third parties except:

• To Auditor's personnel who need to know
• As required by law or professional standards
• With Client's prior written consent

7.3 Security Measures

Auditor will implement appropriate security measures to protect Confidential Information, including:

• Access controls and encryption
• Secure storage and transmission
• Employee confidentiality obligations
• Secure disposal upon engagement completion

7.4 Return/Destruction

Upon engagement completion or Client request, Auditor will return or securely destroy Confidential Information, except for workpapers retained per professional standards.

7.5 Duration

Confidentiality obligations survive termination for [NUMBER] years.

8. INDEPENDENCE AND OBJECTIVITY

8.1 Independence Statement

Auditor represents that:

• Auditor is independent of Client
• No conflicts of interest exist that would impair objectivity
• Auditor has no financial interest in Client or the AI System
• Auditor will disclose any relationships that could affect independence

8.2 Limitations

Auditor has not previously provided:
☐ Design or development services for the AI System
☐ Other services that would impair independence
☐ Services creating self-review threat

If applicable, potential independence concerns and safeguards:
[DESCRIBE ANY CONCERNS AND SAFEGUARDS]

9. LIMITATIONS AND DISCLAIMERS

9.1 Scope Limitations

Client acknowledges that:

• This audit is limited to the scope described herein
• Audit procedures may not detect all issues
• Findings are based on information provided and point-in-time testing
• AI systems may change after the audit
• This audit does not guarantee regulatory compliance

9.2 No Legal Advice

This engagement does not constitute legal advice. Client should consult legal counsel regarding legal obligations and interpretations.

9.3 Report Use

• The audit report is prepared solely for Client's use
• Report may not be shared with third parties without Auditor consent
• Auditor accepts no liability to third parties

☐ Exception: Report may be shared with:
- [REGULATORS, IF APPLICABLE]
- [BOARD OF DIRECTORS]
- [OTHER AUTHORIZED PARTIES]

9.4 Limitation of Liability

TO THE MAXIMUM EXTENT PERMITTED BY LAW:

• Auditor's liability is limited to fees paid for this engagement
• Auditor is not liable for indirect, consequential, or punitive damages
• Auditor is not liable for Client's decisions based on report

10. PROFESSIONAL STANDARDS

10.1 Quality Standards

Auditor will perform this engagement in accordance with:

• Applicable professional auditing standards
• Auditor's quality management policies
• Ethical requirements of relevant professional bodies

10.2 Team Qualifications

The engagement team includes:

10.3 Use of Specialists

Auditor may engage specialists in:
☐ Data science/machine learning
☐ Information security
☐ Legal/regulatory compliance
☐ Industry-specific expertise
☐ [OTHER]

11. TERM AND TERMINATION

11.1 Engagement Term

This engagement commences upon acceptance and continues until delivery of final report or earlier termination.

11.2 Termination

Either party may terminate this engagement:

• For convenience upon [DAYS] written notice
• Immediately for material breach
• If continuation would violate professional standards

11.3 Effects of Termination

Upon termination:
- Client pays for work performed through termination
- Auditor returns Confidential Information
- Auditor may retain workpapers per professional standards
- Confidentiality obligations survive

12. GENERAL TERMS

12.1 Governing Law

This engagement is governed by the laws of [JURISDICTION].

12.2 Disputes

Disputes shall be resolved by:
☐ Mediation, then arbitration in [LOCATION]
☐ Litigation in courts of [JURISDICTION]

12.3 Amendment

Changes to this engagement require written agreement.

12.4 Assignment

Neither party may assign without consent.

12.5 Entire Agreement

This letter constitutes the entire agreement for this engagement.

12.6 Survival

Sections 7 (Confidentiality), 9 (Limitations), and 12 (General) survive termination.

13. ACCEPTANCE

Please indicate your acceptance of this engagement by signing below and returning a copy to us.

We look forward to working with you on this important engagement. If you have any questions, please contact [NAME] at [EMAIL] or [PHONE].

Sincerely,

[AUDITOR FIRM NAME]

Signature: _________________________________

Name: [NAME]

Title: [TITLE]

Date: _________________________________

ACCEPTANCE BY CLIENT

[CLIENT ORGANIZATION NAME] accepts the terms of this engagement as set forth above.

Signature: _________________________________

Name: [NAME]

Title: [TITLE]

Date: _________________________________

SCHEDULE A: HOURLY RATES (IF APPLICABLE)

SCHEDULE B: DETAILED TIMELINE

SCHEDULE C: DOCUMENT REQUEST LIST

Please provide the following documents:

AI System Documentation:
☐ System architecture and design documents
☐ Model cards or model documentation
☐ Training data documentation and datasheets
☐ Validation and testing reports
☐ Performance monitoring data
☐ Incident and error logs

Governance Documentation:
☐ AI ethics policy
☐ AI governance framework
☐ Risk assessment documentation
☐ Impact assessments (bias, privacy, etc.)
☐ Approval and review records
☐ Committee meeting minutes

Compliance Documentation:
☐ Regulatory filings and disclosures
☐ Prior audit reports
☐ Remediation tracking
☐ Training records

Operational Documentation:
☐ Standard operating procedures
☐ Human oversight procedures
☐ Incident response plans
☐ Change management records

This AI System Audit Engagement Letter template is provided for informational purposes. Auditor and client should customize based on specific requirements and applicable professional standards.