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.
The responsibilities of management and identification of the applicable financial reporting framework
Our audit will be conducted on the basis that [management and, when appropriate, those charged with governance] acknowledge and understand that they have responsibility:For the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America;For 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 to error; andTo provide us with:Access to all information of which [management] is aware that is relevant to the preparation and fair presentation 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; andUnrestricted 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 and, when appropriate, those charged with governance] written confirmation concerning representations made to us in connection with the audit.
Other relevant information:
Insert other information, such as fee arrangements, billings, and other specific terms, as appropriate.
Reporting
[Insert appropriate reference to the expected form and content of the auditor’s report. Example follows:]
We will issue a written report upon completion of our audit of Plainsmen, Inc.’s financial statements. Our report will be addressed to the board of directors of Plainsmen, Inc. We cannot provide assurance that 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(s), or withdraw from the engagement.
We also will issue a written report on [insert appropriate reference to other auditors’ reports expected to be issued] upon completion of our audit.
SignedName and TitleDate
Please sign and return the attached copy of this letter to indicate your acknowledgment of, and agreement with, the arrangements for our audit of the financial statements including our respective responsibilities.
Smith and Jones.
Acknowledged and agreed on behalf of Plainsmen, Inc. by
_____________________________
Notes
1 1 Acceptable reporting frameworks contain established accounting principles promulgated by a body designated by the Council of the AICPA under Rule 203 in the AICPA Code of Professional Conduct. These bodies include FASB, FASAB, IFRS, GASB, AICPA, and PCAOB.
2 2 In this chapter, references to management should be read as “management and, when appropriate, those charged with governance,” unless the context suggests otherwise. Those charged with governance are those “with responsibility for overseeing the strategic direction of the entity and obligations related to the accountability of the entity,” including the financial reporting process. (AU-C Glossary of Terms)
3 AU-C 220 Quality Control for an Engagement Conducted in Accordance with Generally Accepted Auditing Standards
Specific responsibilities of the auditor regarding quality control standards for an audit of financial statements
Responsibilities of the engagement quality control reviewer
Supervision of an audit
Quality control is the responsibility of the audit firm. (AU-C 220.01)
DEFINITIONS OF TERMS
Source: AU-C 220.09. For definitions related to this standard, see Appendix A, “Definitions of Terms”: Engagement partner, Engagement quality control review, Engagement quality control reviewer, Engagement team, Firm, Monitoring, Network, Network firm, Partner, Personnel, Professional standards, Relevant ethical requirements, Staff, Suitably qualified external person.
OBJECTIVE OF AU-C SECTION 220
AU-C Section 220.08 states that:
The objective of the auditor is to implement quality control procedures at the engagement level that provide the auditor with reasonable assurance that
