Question

The question reads: The Engagement Letter for Oceanview Marine Company is missing 2 pieces. Make the needed changes/additions directly on the Engagement Letter.

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). 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

Following can be further addition but not mandatory

a) Hiring Restrictions :  general engagement letter condition is that the client won’t try to hire anyone on the current audit team. Usually there’s a required, one-year cooling-off period between working on a client audit and accepting a position with that company

b) Engagement Team Detail : EL usually contains the name of team responsible for audit

c) Statement of co-operation from staff : 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

IAS -210 provides following guidance on EL :

The form and content of audit engagement letters may vary for each client, but they would generally include reference to:

• The objective of the audit of financial statements.

• Management’s responsibility for the financial statements as described in ISA 200.

• The financial reporting framework adopted by management in preparing the financial statements, i.e., the applicable financial reporting framework.

• The scope of the audit, including reference to applicable legislation, regulations, or pronouncements of professional bodies to which the auditor adheres.

• The form of any reports or other communication of results of the engagement.

• The fact that because of the test nature and other inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that even some material misstatement may remain undiscovered; and

Unrestricted access to whatever records, documentation and other information requested in connection with the audit.

• Management’s responsibility for establishing and maintaining effective internal control.

The auditor may also wish to include in the letter:

• Arrangements regarding the planning and performance of the audit.

• Expectation of receiving from management written confirmation concerning representations made in connection with the audit.

• Request for the client to confirm the terms of the engagement by acknowledging receipt of the engagement letter.

• Description of any other letters or reports the auditor expects to issue to the client.

• Basis on which fees are computed and any billing arrangements. 11. When relevant, the following points could also be made:

• Arrangements concerning the involvement of other auditors and experts in some aspects of the audit.

• Arrangements concerning the involvement of internal auditors and other client staff.

• Arrangements to be made with the predecessor auditor, if any, in the case of an initial audit.

• Any restriction of the auditor's liability when such possibility exists.

• A reference to any further agreements between the auditor and the client.