Date:
The Board of
Directors
XYZ Co. Ltd
Dear Sirs,
l. This confirms our
engagement covering the following services requested by you:
·
Statutory
audit of the balance sheet of XYZ Co. Ltd
(‘the Company’) as at 31st March, 200_, the related
statements of Profit and Loss and notes thereon for the year then ended, as
required by the Companies Act, 1956.
·
Tax
audit under section 44AB of the Income-tax Act, 1961, covering the financial
statements and Form No. 3CD of the Company for the year ended 31st
March, 200_.
The
basic objective of our audit is to express an opinion on the truth and
fairness, in all material respects, of the presentation of the financial
statements in conformity with accounting principles generally accepted in India
and to comment on the matters specified in the Companies (Auditor’s Report)
Order, 2003 and other provisions of the Companies Act, 1956.
Audit Responsibilities and Limitations
2.
We
will conduct our audits in accordance with auditing standards generally
accepted in India. Those standards require that we obtain reasonable, rather
than absolute, assurance that the financial statements and Form 3CD are free of
material misstatement whether caused by error or fraud. However, having regard
to the test nature of an audit, persuasive rather than conclusive nature of
audit evidence together with any inherent limitations of any accounting and
internal control system, there is an unavoidable risk that even some material
misstatements of financial statements, resulting from fraud, and to a lesser
extent error, if either exists, may remain undetected. Also, an audit is not
designed to detect error or fraud that is immaterial to the financial
statements.
3. As
part of our audits, we will consider, solely for the purpose of planning our
audit and determining the nature, timing, and extent of our audit procedures,
the Company’s internal control. This consideration will not be sufficient to
enable us to provide assurance on internal control or to identify all
reportable conditions.
4. We will determine that appropriate members
of management are informed of fraud and illegal acts, unless they are clearly
inconsequential, of which we become aware in the regular course of our audit
focused on the financial statements. In
addition, we will inform appropriate members of management of significant audit
adjustments and of reportable conditions noted during our audit procedures
Management’s Responsibilities and
Representations
5. The financial
statements and Form No 3CD are the responsibility of the management of the
Company, which is also responsible for establishing and maintaining effective
internal control, for properly recording transactions in the accounting
records, for safeguarding assets, for prevention and detection of fraud and
error, for complying with accounting standards, for selection and consistent
application of accounting policies, for preparing accounts on a going concern
basis where the company is a going concern and for the overall fair
presentation of the financial statements. Management is also responsible for
providing proper explanation on material departures from accounting standards.
Management of the Company is responsible for identifying and ensuring that the
Company complies with the laws and regulations applicable to its activities.
The management is also responsible for making judgments and estimates that are
reasonable and prudent so as to give a true and fair view of the state of
affairs of the entity at the end of the financial year and of the revenue,
profit and loss and receipts and payments of the entity for the period.
6. Management is
responsible for adjusting the financial statements to correct material
misstatements and for affirming to us in its representation letter that the
effects of any unadjusted audit differences accumulated by us during the
current audits and pertaining to the latest period presented are immaterial,
both individually and in the aggregate, to the financial statements taken as a
whole.
7. As required by
auditing standards generally accepted in India, we will make specific inquiries
of management about the representations contained in the financial statements
and other reports as may be applicable and the effectiveness of internal
control over financial reporting. Auditing standards generally accepted in
India also require that, at the conclusion of the audit, we obtain
representation letters from certain members of management about these matters.
The responses to those inquiries, the written representations, and the results
of our audit tests comprise the evidential matter we will rely upon in forming
an opinion on the financial statements or other reports. Because of the
importance of management’s representations to an effective audit and review,
the Company agrees to release ABC & Associates, Chartered Accountants (herein
after referred to as “ABC”) and its personnel from any liability and costs
relating to our services under this letter attributable to any
misrepresentations by management.
Management is responsible for providing us with all financial records
and related information on a timely basis, and its failure to do so may cause
us to delay our report, modify our procedures, or even terminate our
engagement.
8. If you intend to
publish or otherwise reproduce the financial statements or other reports
together with our report (or otherwise make reference to our firm) in a
document that contains other information, you agree to (a) provide us with a
draft of the document to read, and (b) obtain our approval for inclusion of our
report, before it is printed and distributed. The management of the Company is
responsible for such document and our responsibility is restricted only to the
documents that have been issued under our name.
9. We shall have
unrestricted access to whatever records, documentation and other information
requested in connection with the engagements.
10. The working
papers prepared in conjunction with our audits are the property of our Firm,
constitute confidential information and will be retained by us in accordance
with our Firm’s policies and procedures. However we hereby acknowledge that the
details or data received from you for preparation of these working papers are
confidential information of the Company and will not be disclosed by us to any
third party, except as set out in paragraph 11 below or when required by
legislation, without the prior written consent from the Company.
11. In accordance
with the Statement on Peer Review issued by the Institute of Chartered
Accountants of India, our attestation services may be subject to a peer review
to be conducted by an independent reviewer who can inspect, examine or take
abstract of our work papers including those provided by you.
Fees and Billings
12. We estimate that
our fee for our services, as described in paragraph 1 of this letter, will be
Rs ___plus out-of pocket expenses and service tax, as applicable. In
subsequent years, we will provide you with a similar estimate of our fees and
expenses prior to the commencement of our audit work. Our bills are payable
promptly on presentation.
13. Our fees are
based on the level of staff and the time required to complete each
assignment. These would be reviewed
every year, to consider the impact of increase / decrease in staff costs based
on changes in payment scales, inflation and changes in assignment scope in your
business.
14. Except to the
extent finally determined to have resulted from ABC’s gross negligence or
willful misconduct, ABC’s maximum liability to the Company, for any reason,
relating to the services under this letter shall be limited to the fees paid to
ABC for the services or work product giving rise to liability, the Company will
indemnify and hold harmless ABC and its personnel from any claims, liabilities,
costs and expenses relating to our services under this letter.
15. In the event we
are requested or authorized by the Company or are required by government
regulation, or other legal process to produce our documents or our personnel as
witnesses with respect to our engagements for the Company, the Company will
reimburse us for our professional time and expenses, as well as the fees and
expenses of our counsel, incurred in responding to such requests.
Other Matters
16. Any additional
services or any work for advisory services that you may request, and that we
agree to provide, will be the subject of separate written arrangements.
17. Should
conditions not now anticipated preclude us from completing our audit and
issuing a report as contemplated by the preceding paragraph, we will advise you
promptly and take such action as we deem appropriate.
18. If any portion
of this letter is held to be void, invalid, or otherwise unenforceable, in
whole or part, the remaining portions of this letter shall remain in effect.
Pursuant to our agreement as reflected
in this letter, we will audit and report on the financial statements and tax
audit and other reports of the Company for each of its subsequent fiscal years
until either the Company or we terminate this agreement.
If these arrangements are acceptable,
please sign one copy of this letter and return it to us. We very much appreciate the opportunity to
serve you and would be pleased to furnish any additional information you may
request concerning our responsibilities and functions. We trust that our
association will be a long and mutually beneficial one.
ABC
& Associates
Chartered
Accountants
Partner
XYZ
Co. Ltd
By:
Director
__________________________
[Date]
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