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Chapter 10

ACTG 4P62 Chapter Notes - Chapter 10: Terrorism Financing, Engagement Letter, Canada Revenue Agency


Department
Accounting
Course Code
ACTG 4P62
Professor
p
Chapter
10

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CGA / 1010-B1
Engagement letter — Audit: Corporation
[CGA firm’s letterhead]
[Date]
[Addressed to CEO or other person with the authority to sign on behalf of the company]
Dear [Client]:
This letter confirms the terms of our engagement as auditors of [name of corporation] (“the Company”) for the [year or
other financial period] ending on [date].
Our objectives and responsibilities
Our [statutory] function as auditors of the Company is to report to the shareholders whether the annual financial
statements present fairly the financial position, results of operations, and cash flow in accordance with Canadian
generally accepted accounting principles. To meet this objective, and in accordance with Canadian generally accepted
auditing standards, our audit will include an examination of the accounting system, internal controls, and related data.
Our assessment of the reliability of the accounting system and internal controls will affect the extent of our audit work.
We will plan and perform the audit to obtain reasonable assurance that the financial statements are not materially
misstated due to fraud or error. Absolute assurance is not possible, due to the inherent limitations of internal control and
audit testing procedures, the persuasive (rather than conclusive) nature of audit evidence, and the nature of fraud, which
may include attempts at concealment through collusion and forgery. Thus, our engagement should not be relied upon to
detect all errors, fraud or illegal acts that may have taken place. However, should any of the following be discovered by
us during our audit, they will be disclosed to you:
a) misstatements, resulting from error, other than trivial errors;
b) fraud or any information obtained that indicates that a fraud may exist;
c) any evidence obtained that indicates that an illegal or possibly illegal act, other than one considered inconsequential,
has occurred;
d) significant weaknesses in the design or implementation of internal control to prevent and detect fraud or error; and
e) related party transactions identified by us that are not in the normal course of operations and that involve significant
judgments made by management concerning measurement or disclosure.
The matters communicated will be those that we identify during the course of our audit. Audits do not usually identify all
matters that may be of interest to management in discharging its responsibilities. The type and significance of the matter
to be communicated will determine the level of management to which the communication is directed.
When a properly designed accounting system is used correctly, some reliance can be placed on the system of internal
control to prevent or detect irregularities. However, our audit procedures will not be sufficient to enable us to provide an
opinion on the effectiveness of internal control over financial reporting.
We will advise [identify those having oversight responsibility for the financial reporting process] in writing of the
relationships between us and the Company (including related entities) that, in our professional judgment, may reasonably
be thought to bear on our independence. Further, we will confirm our independence with respect to the Company.
We will consider the information in draft copies of [specify public documents] for the purpose of providing our consent
to the inclusion of or reference to full or summarized financial statements that we have audited. 1
In order to complete our audit, we will be relying on [describe arrangements concerning involvement of specialists or
internal auditors, reliance on another auditor, or arrangements involving a predecessor auditor]. 1
We will prepare the Company’s corporation income tax returns with supporting schedules, examine assessment notices
respecting them, advise on income tax matters generally, and discuss any matters concerning your taxes with Canada
Revenue Agency representatives. 1
November 2005
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