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					ENGAGEMENT LETTERS



    .....Communicate in writing to the individual or group who retained the auditor
    the timing, terms, nature and limitations of the engagement to be performed, as
    well as the reporting objectives and other responsibilities assumed by the
    auditor.



As part of the planning process of an engagement, the auditor must communicate to
the auditee in writing the timing, terms, nature and limitations of the engagement to be
performed. The reporting objectives and other responsibilities assumed by the auditor
must also be clearly communicated. An engagement letter is useful in establishing and
obtaining confirmation of these necessary understandings between the entity and the
independent auditor.

The engagement letter should be addressed to the individual or group who retained the
auditor, usually the legislative authority or the governmental unit (e.g., Secretary,
Deputy Secretary or Bureau Director of a State Agency; Legislative Committee or
Individual; School Board of Directors; County Commissioners; Township Supervisors).

The engagement letter should indicate the following:

•    Applicable standards in which the engagement will be conducted;

•    Whether an opinion will be expressed;

•    Management’s responsibility for the financial statements, for internal control over
     financial reporting, for compliance with laws and regulations, and for making
     financial records and related information available;

•    Management’s responsibility for adjusting the financial statements to correct
     material misstatements and providing the auditor with a representation that the
     effects of any uncorrected misstatements aggregated by the auditor during the
     current engagement and pertaining to the latest period presented are immaterial.

•    Whether testing of transactions will be performed;

•    Management Representations Letter will be requested;

•    Whether an attorney letter will be requested;

•    Expected accomplishments of the engagement; i.e., what the engagement is
     designed to detect/not detect;

•    Whether confirmation letters will be utilized;


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•   Approximate start and end date of the engagement; and

•   Fees assessed for the engagement.

[Note: The above list is not intended to be all-inclusive nor may all items be applicable
for all engagements. AU Section 310 - “Establishing an Understanding With the Client,”
paragraphs .06 and .07, list specific matters for which an understanding may be
necessary. Use auditor judgement to tailor the list to the engagement.]

Upon receipt, the entity that requested the audit should review the terms and conditions
of the engagement as specified in the letter, and if they do not agree or have questions,
they should contact the auditor for changes or clarification.

Sample engagement letters for financial and performance audits are enclosed. These
samples are prepared for audits conducted in accordance with AICPA standards and
Government Auditing Standards. These samples should be modified according to the
nature and scope of the engagement to be performed (e.g., attestation standards).




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         SAMPLE AUDIT ENGAGEMENT LETTER FOR A FINANCIAL AUDIT



                                                               (Date)
(Name and Address of Group or Individual
  Which Retained the Auditor)



We are pleased to confirm our understanding of the services we are to provide for
(name of group or individual which retained the auditor) for the (period, year, or years)
ended (dates). We will audit the general purpose financial statements of (name of
auditee) as of and for the (period, year, or years) ended (dates).

Our audit will be conducted in accordance with Government Auditing Standards issued
by the Comptroller General of the United States, and will include tests of accounting
records of (name of auditee) and other procedures we consider necessary to enable us
to express an unqualified opinion that the financial statements are fairly presented, in all
material respects, in conformity with generally accepted accounting principles. If our
opinion is other than unqualified, we will fully discuss the reasons with you in advance.
If for any reason, we are unable to complete the (enter type of engagement), we will not
issue a report as a result of this engagement.

Our procedures will include tests of documentary evidence supporting the transactions
recorded in the accounts, and may include tests of the physical existence of
inventories, and direct confirmation of receivables and certain other assets and
liabilities by correspondence with selected individuals, creditors, and financial
institutions. We will request written representations from your attorneys as part of the
engagement, and they may bill you for responding to this inquiry. At the conclusion of
our audit, we will also request certain written representations from you about the
financial statements and related matters.

An audit includes obtaining an understanding of internal control sufficient to plan the
audit and to determine the nature, timing and extent of audit procedures to be
performed. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Therefore, our audit will involve
judgement about the number of transactions to be examined and the areas to be
tested. Also, we will plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. However, because
of the concept of reasonable assurance and because we will not perform a detailed
examination of all transactions, there is a risk that material errors or fraud may exist and
may not be detected by us. We will advise you, however, of any matters of that nature
that come to our attention. Our responsibility as auditors is limited to the period
covered by our audit and does not extend to matters that might arise during any later
periods for which we are not engaged as auditors.

We understand that you will provide us with the basic information required for our audit
and that you are responsible for the accuracy and completeness of that information. We

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will advise you about appropriate accounting principles and their application and will
assist in the preparation of your financial statements, but the responsibility for the
financial statements remains with you. This responsibility includes establishing and
maintaining effective internal control over financial reporting, compliance with applicable
laws and regulations and adjustments, both material and non-material, made to the
financial statements.

We understand that your employes will type all cash or other confirmations we request
and will locate any invoices selected by us for testing.

Our audit is not specifically designed and cannot be relied on to disclose reportable
conditions, that is significant deficiencies in the design or operation of internal controls.
However, during the audit, if we become aware of such reportable conditions or ways
that we believe management practices can be improved, we will communicate them to
you in a separate letter.

We expect to begin our audit on approximately (date) and to issue our report no later
than (date).

[If applicable, include a paragraph concerning accumulation and invoicing of costs, and
a preliminary estimate of the fee, based on anticipated cooperation from auditee
personnel and the assumption that unexpected circumstances will not be encountered
during the audit.]

We appreciate the opportunity to be of service to you and believe this letter accurately
summarizes the significant terms of our engagement. If you have any questions,
please let us know. If you do not agree or have questions concerning the terms of our
engagement as described in this letter, please contact us for changes or clarification as
soon as possible. This letter will continue in effect until canceled by either party.

Sincerely,



______________________________
(Auditor's Name)




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      SAMPLE AUDIT ENGAGEMENT LETTER FOR A PERFORMANCE AUDIT

                                                               (Date)
(Name and Address of Group or Individual
  Which Retained the Auditor)

We are pleased to confirm our understanding of the services we are to provide for
(name of group or individual which retained the auditor) for the (period, year, or years)
ended (dates). We will audit the (name of function) of (name of auditee) as of and for
the (period, year, or years) ended (dates), and will address the following objectives:


[List Objectives Here]


Our audit will be conducted in accordance with generally accepted government auditing
standards and regulations covering (name of function) and will include tests of records
of (name of auditee), compliance with the regulations, and other procedures we
consider necessary. If for any reason, we are unable to complete the (enter type of
engagement), we will not issue a report as a result of this engagement.

Our procedures will include tests of documentary evidence to allow us to meet the
objectives outlined above. [List type of tests that may be performed including whether or
not a Management Representations Letter and Letter of Audit Inquiry will be requested.]

An audit includes obtaining an understanding of management controls sufficient to plan
the audit and to determine the nature, timing and extent of audit procedures to be
performed. An audit includes examining, on a test basis, evidence supporting [modify
as necessary, depending on objectives]; therefore, our audit will involve judgement
about the number of transactions to be examined and the areas to be tested. Also, we
will plan and perform the audit to obtain reasonable assurance about whether the
transactions are free of material misstatement. However, because of the concept of
reasonable assurance and because we will not perform a detailed examination of all
transactions, there is a risk that material errors, fraud or illegal acts may exist and may
not be detected by us. We will advise you, however, of any matters of that nature that
come to our attention. Our responsibility as auditors is limited to the period covered by
our audit and does not extend to matters that might arise during any later periods for
which we are not engaged as auditors.

We understand that you will provide us with the basic information required for our audit
and that you are responsible for the accuracy and completeness of that information. We
will advise you about appropriate management control procedures and their application,
but the responsibility for the management controls and compliance with applicable laws
and regulations remains with you. This responsibility includes the maintenance of
adequate records and related management control policies and procedures, and the
safeguarding of assets.



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We understand that your employes will type confirmations we request and will locate
any documents selected by us for testing. [If applicable to objectives.]

Our audit is not specifically designed and cannot be relied on to disclose reportable
conditions, that is significant deficiencies in the design or operation of the internal
control structure. However, during the audit, if we become aware of such reportable
conditions or ways that we believe management practices can be improved, we will
communicate them to you in a separate letter. [If applicable to objectives.]

We expect to begin our audit on approximately (date) and to issue our report no later
than (date).

[If applicable, include a paragraph concerning accumulation and invoicing of costs, and
a preliminary estimate of the fee, based on anticipated cooperation from auditee
personnel and the assumption that unexpected circumstances will not be encountered
during the audit.]

We appreciate the opportunity to be of service to you and believe this letter accurately
summarizes the significant terms of our engagement. If you have any questions,
please let us know. If you do not agree or have questions concerning the terms of our
engagement as described in this letter, please contact us for changes or clarification as
soon as possible. This letter will continue in effect until canceled by either party.

Sincerely,



______________________________
(Auditor's Name)




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