Question

What is the other error that this engagement letter is missing?

LILTS BERGER & ASSOCIATES	4-1
Certified Public Accountants	CW 11/23/2018
Ocean City, Florida 33140

October 30, 2018

Mr. Donald Phillips, President

36 Clearwater Lake Road

Ocean City, Florida 33140

Dear Mr. Phillips:

You have requested that we audit the financial statements of Oceanview Marine Company, which comprise the balance sheet for December 31, 2018, and the related statements of income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements. We are pleased to confirm our acceptance and understanding of this audit engagement by means of this letter. Our audit will be conducted with the objective of our expressing an opinion on the financial statements.

We will perform our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement are free from material misstatement and determine whether it was due to fraud or error. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risk of material misstatement of the financial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

Because of the inherent limitations of and audit, together with the inherent limitations of internal control, an unavoidable risk that some material misstatements may not be detected exists, even though the audit is properly planned and performed in accordance with GAAS.

	4-2
	CW 11/23/2018

In making our risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. However, we will communicate to you in writing concerning and significant deficiencies or material weaknesses in internal control relevant to the audit of the financial statements that we have identified during the audit.

Our audit will be conducted on the basis that the management of Oceanview Marine Company acknowledges and understands that it has responsibility for

1. the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America;
2. the design, implementation and maintenance of internal control relevant to the fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.
3. to provide us with access to all information of which management is aware that is relevant to the preparation of the financial statements such as records, documentation, and other matters; additional information that we may request from management for the purpose of the audit; and unrestricted access to persons within the entity from whom we determine it necessary to obtain audit evidence.

As part of our audit process, we will request from management written confirmation concerning representations made to use in connection with the audit.

We will issue a written report upon completion of our audit of Oceanview Marine Company’s financial statements. Our report will be addressed to the board of directors of Oceanview Marine Company. We cannot provide assurance than an unmodified opinion will be expressed. Circumstances may arise in which it is necessary for us to modify our opinion, add an emphasis-of-matter or other-matter paragraph, or withdraw from the engagement.

4-3

CW 11/23/2018

The timing of our services is scheduled for performance and completion as follows:

            Begin interim fieldwork                        December 1, 2018

            Completion of fieldwork                       March 15, 2019

            Delivery of management letter              March 22, 2019

            Delivery of audit report                         March 29, 2019

            Delivery of tax returns                          March 29, 2019

Our fees will be based on our standard hourly rates. Invoices will be submitted periodically as the work progresses and are payable upon presentation. Should we find any conditions that could significantly affect our initial estimated total fees of $32,000, we will notify you immediately.

Please sign and return the attached copy of this letter to indicate your acknowledgement of, and agreement with, the arrangements for our audit of the financial statements including our respective responsibilities.

Yours very truly,

Charles Ward          

Charles Ward, CPA

Partner

Per:    Donald Phillips     

Donald Phillips, President

Oceanview Marine Company

       November 10, 2018

Answer 1

The additions and changes have been highlighted in bold and underlined. Since, the engagement letter has a predefined format, the phrases will have a common language.

__________

Mr. Donald Phillips, President

Oceanview Marine Company

36 Clearwater Lake Road

Ocean City, Florida 33140

Dear Mr. Phillips:

You have requested that we audit the financial statements of Oceanview Marine Company, which comprise the balance sheet for December 31, 2018, and the related statements of income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements. We are pleased to confirm our acceptance and understanding of this audit engagement by means of this letter. Our audit will be conducted with the objective of our expressing an opinion on the financial statements.

We will conduct our audit in accordance with Generally Accepted Auditing Standards (GAAS) as applicable in United States. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Because of the test nature and otherinherent limitations of an audit, together with the inherent limitations of any accounting and internal control system, there is an unavoidable risk that some material misstatements may not be detected, even though the audit is properly planned and performed in accordance with generally accepted auditing standards.

In making our risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. However, we will communicate to you in writing concerning any significant deficiencies or material weaknesses in internal control relevant to the audit of the financial statements that we have identified during the audit.

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Our audit will be conducted on the basis that the management of Oceanview Marine Company acknowledges and understands that they have responsibility for:

a) the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America;

b) the design, implementation and maintenance of internal control relevant to the fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.

c) to provide us with access to all information of which management is aware that is relevant to the preparation of the financial statements such as records, documentation, and other matters; additional information that we may request from management for the purpose of the audit; and unrestricted access to persons within the entity from whom we determine it necessary to obtain audit evidence.

As part of our audit process, we will request from management written confirmation concerning representations made to us in connection with the audit.

We look forward to full cooperation from your staff and we trust that they will make available to us whatever records, documentation and other information are requested in connection with our audit. The form and content of our audit report may require modification in accordance with our audit findings.

We will issue a written report upon completion of our audit of Oceanview Marine Company’s financial statements. Our report will be addressed to the board of directors of Oceanview Marine Company. We cannot provide assurance than an unqualified opinion will be expressed. Circumstances may arise in which it is necessary for us to modify our opinion, add an emphasis-of-matter or other-matter paragraph, or withdraw from the engagement.

The timing of our services is scheduled for performance and completion as follows:

                  Begin interim fieldwork                                     December 1, 2018

                  Completion of fieldwork                                   March 15, 2019

                  Delivery of management letter                      March 22, 2019

                  Delivery of audit report                                      March 29, 2019

                  Delivery of tax returns                                         March 29, 2019

Our fees will be based on our standard hourly rates. Invoices will be submitted periodically as the work progresses and are payable upon presentation. Should we find any conditions that could significantly affect our initial estimated total fees of $32,000, we will notify you immediately.

Please sign and return the attached copy of this letter to indicate your acknowledgement of, and agreement with, the arrangements for our audit of the financial statements including our respective responsibilities.

Yours very truly,

Charles Ward

Charles Ward, CPA

Partner