T. Steele Rose, CPA, recently published an article in CPA
Magazine regarding new guidance for preparing financial statement engagement
letters. He states that early implementation is permitted for the proposed
SSARS, which covers the Preparation of Financial Statements. If accepted they
would be effective for the preparation of financial statements for periods
ending on or after December 15, 2015.
See below for his example of an engagement letter:
To the appropriate
representative of management of ABC Company:
You have requested that we
prepare the financial statements of ABC Company, which comprise the balance
sheet as of December 31, 2014, and the related statements of income, and
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 our understanding of this engagement to prepare the financial
statements of ABC Company by means of this letter.
Our Responsibilities:
The objective of our
engagement is to prepare financial statements in accordance with accounting
principles generally accepted in the United States based on information
provided by you.
We will conduct our engagement
in accordance with Statements on Standards for Accounting and Review Services
(SSARSs) promulgated by the Accounting and Review Services Committee of the
AICPA and comply with the AICPA’s Code of Professional Conduct, including the
ethical principles of integrity, objectivity, professional competence, and due
care.
We are not required to, and
will not, verify the accuracy or completeness of the information you will
provide to us for the engagement or otherwise gather evidence for the purpose
of expressing an opinion or a conclusion. Accordingly, we will not express an
opinion or a conclusion or provide any assurance on the financial statements.
Our engagement cannot be
relied upon to identify or disclose any financial statement misstatements,
including those caused by fraud or error, or to identify or disclose any
wrongdoing within the entity or noncompliance with laws and regulations.
Your Responsibilities:
The engagement to be performed
is conducted on the basis that you acknowledge and understand that our role
is the preparation of the financial statements in accordance with accounting
principles generally accepted in the United States.
You have the following overall
responsibilities that are fundamental to our undertaking, in accordance with
SSARSs, the engagement to prepare your financial statements:
a. The
prevention and detection of fraud
b. To
ensure that the entity complies with the laws and regulations applicable to
its activities
c. To
make all financial records and related information available to us
d. The
accuracy and completeness of the records, documents, explanations, and other
information, including significant judgments, you provide to us for the engagement
to prepare financial statements
You agree that the financial
statements will clearly indicate that no CPA provides any assurance on them.
Our fees for these services
are…
You agree to hold us harmless
and to release, indemnify, and defend us from any liability or costs, including
attorney’s fees, resulting from management’s knowing misrepresentations to us.
Please sign and return the
attached copy of this letter to indicate your acknowledgement of, and
agreement with, the arrangements for our engagement to prepare the financial
statements described herein, and our respective responsibilities.
Sincerely yours,
_______________________
[Signature of accountant or
accountant’s firm]
Acknowledged and agreed on
behalf of ABC Company by:
_______________________
Signed
[Name and title]
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