EXAMPLE OF AN ENGAGEMENT LETTER FOR A REEXAMPLE OF AN ENGAGEMENT LETTER FOR A REVIEW OF AN INTERIM FINANCIAL REPORT

EXAMPLE OF AN ENGAGEMENT LETTER FOR A REVIEW OF AN INTERIM FINANCIAL REPORT

The following letter is not intended to be a standard letter. It is to be used as a guide only and will need to be adapted according to individual requirements and circumstances. This illustrative letter is written in the context of a half-year financial report under the Corporations Act 2001.

To [those charged with governance:[6]]

Scope

You have requested that we review the half-year financial report[7] of [name of entity], which comprises the balance sheet as at 31 December 20XX, and the related statements of income, changes in equity and cash flows for the six-month[8] period ended on that date, and a summary of significant accounting policies and other explanatory notes. We are pleased to confirm our acceptance and our understanding of the terms and objectives of our engagement by means of this letter.

Our review will be conducted in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of Interim and Other Financial Reports Performed by the Independent Auditor of the Entity, issued by the Auditing and Assurance Standards Board, with the objective of providing us with a basis for reporting whether we have become aware of any matter [anything has come to our attention[9]] that makes [causes9] us [to9] believe that the half-year financial report is not prepared, in all material respects, in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001 [indicate applicable financial reporting framework]. Such a review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures and does not, ordinarily, require corroboration of the information obtained. The scope of a review of an interim financial report is substantially less than the scope of an audit conducted in accordance with Auditing Standards whose objective is the expression of an opinion regarding the financial report and accordingly, we shall express no such opinion. ASRE 2410 requires us to also comply with the ethical requirements relevant to the audit of the annual financial report of the entity.

We expect to report on the half-year financial report[10] as follows:

[Include text of sample review report - see Appendix 3 or 4 as appropriate.]

Responsibility for the half-year financial report, including adequate disclosure, is that of [those charged with governance.[11]] This includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the half-year financial report that is free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances. As part of our review, we shall request written representations from management concerning assertions made in connection with the review. We shall also request that where any document containing the half-year financial report indicates that the half-year financial report has been reviewed, our report will also be included in the document.

A review of the half-year financial report does not provide assurance that we shall become aware of all significant matters that might be identified in an audit. Further, our engagement cannot be relied upon to disclose whether fraud or errors, or illegal acts exist. However, we shall inform you of any material matters that come to our attention.

Independence

We confirm that, to the best of our knowledge and belief, we currently meet the independence requirements of the Corporations Act 2001 in relation to the review of the half-year financial report. In conducting our review of the half-year financial report, should we become aware that we have contravened the independence requirements of the Corporations Act 2001, we shall notify you on a timely basis. As part of our review process, we shall also provide you with a written independence declaration as required by the Corporations Act 2001.

The Corporations Act 2001 includes specific restrictions on the employment relationships that can exist between the reviewed entity and its auditors. To assist us in meeting the independence requirements of the Corporations Act 2001, and to the extent permitted by law and regulation, we request you discuss with us:

• The provision of services offered to you by [insert firm name] prior to engaging or accepting the service; and
• The prospective employment opportunities of any current or former partner or professional employee of [insert firm name] prior to the commencement of formal employment discussions with the current or former partner or professional employee.

Presentation of the reviewed half-year financial report on the Internet

It is our understanding that [the entity] intends to publish a hard copy of the reviewed half-year financial report and the auditor’s review report for members, and to electronically present the reviewed half-year financial report and the auditor’s review report on its internet web site. When information is presented electronically on a web site, the security and controls over information on the web site should be addressed by [the entity] to maintain the integrity of the data presented. The examination of the controls over the electronic presentation of reviewed financial information on the entity’s web site is beyond the scope of the review of the half-year financial report. Responsibility for the electronic presentation of the half-year financial report on the entity’s web site is that of the [governing body of the entity].

Fees

[Insert additional information here regarding fee arrangements and billings, as appropriate.]

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 review.

[This letter will be effective for future years unless it is terminated, amended or superseded.[12]]

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 review of the half-year financial report.

Yours faithfully,

(signed)

……………………….

Name and Title

Date

Acknowledged on behalf of [entity] by

(signed)

……………………….

Name and Title

Date