Abueva, CPA is reviewing the draft audit engagement letter prepared by her staff. Excerpts of the draft letter are presented below: Gentlemen: We are pleased to confirm our acceptance and our understanding of this engagement by means of this letter. Our audit will be conducted with the objective of our expressing an opinion on accuracy of the financial statements. We will conduct our audit in accordance with Philippine Financial Reporting Standards. 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 any 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 risks of material misstatement of the financial statements, due to error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Because of the test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal control system, there is unavoidable risk that even some material misstatements may remain undiscovered. As agreed with you, we will not consider the company’s internal control structure, and instead we will design audit procedures that are appropriate in the circumstances. We remind you that the responsibility for the preparation of financial statements (except for the notes) that present fairly the financial position, financial performance and cash flows of the company in accordance with Philippine Financial Reporting Standards is that of the management of the company. Our auditor’s report will explain that management is responsible for the preparation and the fair presentation of the financial statements in accordance with the applicable financial reporting framework and this responsibility includes: Designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from misstatement, whether due to fraud or error. Selecting and applying appropriate accounting policies; and Making accounting estimates that are appropriate in the circumstances. 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. Yours very truly, Snow Abuella Partner REQUIRED: Highlight by using yellow color the errors in the draft engagement letter (7 specific word or group of words) Enumerate at least one deficiency in the draft engagement letter
Abueva, CPA is reviewing the draft audit engagement letter prepared by her staff. Excerpts of the draft letter are presented below:
Gentlemen:
We are pleased to confirm our acceptance and our understanding of this engagement by means of this letter. Our audit will be conducted with the objective of our expressing an opinion on accuracy of the financial statements.
We will conduct our audit in accordance with Philippine Financial Reporting Standards. 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 any 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 risks of material misstatement of the financial statements, due to error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
Because of the test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal
We remind you that the responsibility for the preparation of financial statements (except for the notes) that present fairly the financial position, financial performance and
- Designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from misstatement, whether due to fraud or error.
- Selecting and applying appropriate accounting policies; and
- Making accounting estimates that are appropriate in the circumstances.
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.
Yours very truly,
Snow Abuella
Partner
REQUIRED:
- Highlight by using yellow color the errors in the draft engagement letter (7 specific word or group of words)
- Enumerate at least one deficiency in the draft engagement letter
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