Question

In: Accounting

Question CPA firms are required to communicate with managers and board of directors of clients regarding...

Question

CPA firms are required to communicate with managers and board of directors of clients regarding the following aspects,

  1. The CPA and their clients’ responsibility;
  2. The CPA planned audit timing and audit scope;
  3. The critical audit matters the CPA firm identified during the audit, for which they believe these matters should be communicated with the board of directors.
  4. The CPA firm independence.

Please select one public firm and refer to its latest annual report or other information, prepare a letter for CPA firm titled as “The Communication Letter with the board of directors”, wherein the contents above are included.

Solutions

Expert Solution

ENGAGEMENT LETTER BETER AUDITOR AND CLIENT

To, The Board of Directors of .................. (name of the Entity) (Address)

Dear Sirs, I / We refer to the letter dated _________ informing me / us about my / our (re) appointment/ratification as the auditors of the Company. You have requested that I / we audit the financial statements of the Company as defined in RELEVANT Section for the financial year(s) beginning April 1, 20XX and ending March 31, 20YY2 . The financial statements of the Company include, where applicable, consolidated financial statements of the Company and of all its subsidiaries, associate companies and joint ventures. I am / We are pleased to confirm my / our acceptance and my / our understanding of this audit engagement by means of this letter. My / Our audit will be conducted with the objective of me / our expressing an opinion if the aforesaid financial statements give the information required by the Act in the manner so required, and give a true and fair view in conformity with the applicable accounting principles generally accepted , of the state of affairs of the Company as at 31st March, 20YY, and its profit/loss and its cash flows for the year ended on that date. In forming my / our opinion on the financial statements, I / we will rely on the work of branch auditors appointed by the Company and my / our report would expressly state the fact of such reliance.3 I / We will conduct my / our audit in accordance with the Standards on Auditing (SAs), issued by the Institute and deemed to be prescribed by the Government in accordance with relevant Section of the APPLICABLE Act. Those Standards require that I / we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

Because of the inherent limitations of an audit, including the possibility of collusion or improper management override of controls, there is an unavoidable risk that material misstatements due to fraud or error may occur and not be detected, even though the audit is properly planned and performed in accordance with the SAs. In making our risk assessments, we consider internal control relevant to the entity’s preparation 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 in internal control relevant to the audit of the financial statements that we have identified during the audit. My / Our audit will be conducted on the basis that the Management and those charged with governance (Audit Committee / Board) acknowledge and understand that they have the responsibility: (a) For the preparation of financial statements that give a true and fair view in accordance with the applicable Financial Reporting Standards and other generally accepted accounting principles . This includes:  Compliance with the applicable provisions of the Act;

 Proper maintenance of accounts and other matters connected therewith; 

The responsibility for the preparation of the financial statements on a going concern basis; 

The preparation of the annual accounts in accordance with, the applicable accounting standards and providing proper explanation relating to any material departures from those accounting standards; 

Selection of accounting policies and applying them consistently and making judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

 Taking proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(f) To provide me / us, inter alia, with:

(i) Access, at all times, to all information, including the books, accounts, vouchers and other records and documentation of the Company, whether kept at the Head Office or elsewhere, of which the Management is aware that are relevant to the preparation of the financial statements such as records, documentation and other matters. This will include books of account maintained in electronic mode;

(ii) Access, at all times, to the records of all the subsidiaries (including associate companies and joint ventures in so far as it relates to the consolidation of its financial statements,

(iii) Access to reports, if any, relating to internal reporting on frauds (e.g., vigil mechanism reports etc.), including those submitted by cost accountant

(iv) Additional information that I / we may request from the Management for the purposes of my / our audit;

(v) Unrestricted access to persons within the Company from whom I / we deem it necessary to obtain audit evidence. This includes my / our entitlement to require from the officers of the Company such information and explanations as I / we may think necessary for the performance of my / our duties as the auditors of the Company; and

(vi) All the required support to discharge my / our duties as the statutory auditors as stipulated under the APPLICABLE  standards on auditing and applicable guidance.


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