Sample letter of audit enggagement

To The Board of Directors
Client’s Name & Address

Dear Sirs,

You have requested that we audited the financial statements of CLIENT’S NAME as at 31 December 2007 and related statements of income and cash flows for the year ending.

We are please to confirm our acceptance and our understanding of this engagement by means of this letter. Our audit will be made with the objective of our expressing an opinion on the financial statements.

We will conduct our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on the test basis, evidence supporting the amounts and disclosure in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation.

Audit

1. As laid in the Companies Act, 1965, you as directors, are responsible for maintenance of the company’s accounting records and the preparation of annual accounts. You are also responsible for making available to us, as and when required, all the company’s accounting records and all other records and related information, including minutes of all management and shareholders’ meetings.

2. Our duty as auditors is to examine, and report to shareholders on the accounts produced by the directors and give our opinion thereof. In forming our opinion on the financial statements, we will perform sufficient tests to obtain reasonable assurance as to whether the information contained in the underlying accounting records and other source data is reliable and sufficient as the basis for the preparation of the financial statements. We will also decide whether the information is properly communicated in the financial statements.

3. The responsibility for prevention and detection of fraud and error rest with management through the implementation and continued operation of adequate system of internal control. Because of the test nature and other inherent limitations of an audit, together with the inherent limitations of any system of internal control, there is an unavoidable risk that even some material misstatement may remain undiscovered.

4. In addition to our report on financial statement we expect to provide you with a separate letter concerning any material weaknesses in internal control, which come to our notice.

5. We look forward to full co-operation with 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.

Fee

Our fees are based upon the degree of responsibility and skill involved and time necessarily occupied on the work and will be subject to review each year. Our out -of - pocket expenses will be additional to our fees.

Acknowledgement

We shall be grateful if you will acknowledge receipt of this letter, the terms of which will continue to apply until a subsequent letter varies them. If the contents are not in accordance with your understanding of our appointment, we shall be pleased to receive your observations and give you any further information you require.

Please sign and return the attached copy of this letter to indicate that it is in accordance with your understanding of the arrangements for our audit of the financial statements.