Essay About Audit Of The Financial Statements And Audit Engagement Letter Deficiencies

Audit Engagement Letter Deficiencies
DeficiencyProper Wording/PunctuationNo indication of name of the appointed auditor or CPA firm in the heading section.TEST AND CHECK CPA FIRMCertified Public AccountantsInsufficient details regarding its company’s address.It must state completely its company address specifiying its street, district, town or village. The improper use of punctuation marks in the salutation. It must use colon(:) or comma(,) rather than speech marks(“).Dear Mr. Rand:/ Dear Mr. Rand,Be specific with wordings to properly convey its message. Use the word audit instead of examination/examineIt must be:This will confirm our understanding of the arrangements for our audit of the financial statements…We will audit the Company’s balance sheet…Indicate fully the objective and the scope of the audit of the financial statements. We will audit the Companys balance sheet as of the December 31, 20xx, and the related statements of income, retained earnings, and cash flows for the year then ended, for the purpose of expressing an opinion on them. In addition to the second paragraph, the auditor should clearly emphasize the responsibilities of the related parties with regards to the financial statements.The financial statements are the responsibility of the Company management.  Our responsibility is to express an opinion on the financial statements based on our audit.The structure of the sentence in the second paragraph should be simple for easy understanding. Avoid making lengthy sentences. Also, be specific with your objective such as the use of “obtain reasonable assurance than the usage of only “assure”.Our audit will be in accordance with generally accepted auditing standards.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Specify clearly on what component of the financial statements the evidence is used to support.Our audit will include examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.Discuss with the company the procedures to be undergone by the auditor to create an awareness of the process. The letter may include:Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected customers, creditors, legal counsel, and banks.  At the conclusion of our audit, we will request certain written representations from you about the financial statements and matters related thereto.In the second to the last sentence of the third paragraph, restate it with a more formal wordings. However, we will inform you of any material errors, and all irregularities or illegal acts, unless they are clearly inconsequential, that come to our attention.The agreements regarding the production or distribution of the audited financial statements and the association of the auditor’s name should be discussed to prevent any unauthorized and illegal acts. If you intend to publish or otherwise reproduce the financial statements and make reference to our firm, you agree to provide us with printers proofs or masters for our review and approval before printing.  You also agree to provide us with a copy of the final reproduced material for our approval before it is distributed.