When a company engages an independent accountant to perform a review of its financial statements, a crucial document that sets the expectations and scope of this service is the engagement letter. For many professionals, familiarizing themselves with the Aicpa Sample Review Engagement Letter is a fundamental step in ensuring clarity and avoiding misunderstandings. This article will delve into the components and significance of this standard document, providing valuable insights for both accountants and business owners.
The Purpose and Structure of an Aicpa Sample Review Engagement Letter
An Aicpa Sample Review Engagement Letter serves as a formal contract between the accountant and the client. Its primary purpose is to outline the services to be performed, the responsibilities of both parties, and the terms under which the review will be conducted. This document is critically important for establishing a clear understanding and minimizing the risk of disputes or misinterpretations. It ensures that both the accountant and the client are on the same page regarding what the review entails and what outcomes can be expected.
The letter typically includes several key sections, each addressing a specific aspect of the engagement. These often encompass:
- Identification of the parties involved.
- A description of the services to be provided (i.e., a review of financial statements).
- The objective of a review engagement.
- The responsibilities of management.
- The responsibilities of the accountant.
- Limitations of a review engagement compared to an audit.
- Fees and billing arrangements.
- Any other relevant terms and conditions.
To further illustrate, consider this simplified breakdown of responsibilities:
| Party | Key Responsibilities |
|---|---|
| Management | Preparing accurate financial statements, providing all necessary information, maintaining internal controls. |
| Accountant | Performing review procedures, communicating findings, issuing a report. |
Aicpa Sample Review Engagement Letter for a Small Business
Dear [Client Name],
This letter confirms our understanding of the services we will provide to [Client Company Name] for the period ending [Date]. We will perform a review of the accompanying financial statements of [Client Company Name], which comprise the balance sheet as of [Date], and the related statements of income, changes in equity, and cash flows for the year then ended, and the notes to the financial statements.
Our review will be conducted in accordance with Statements on Standards for Accounting and Review Services (SSARSs) promulgated by the American Institute of Certified Public Accountants (AICPA). As a result, we will not express an opinion that there are no material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles. We will be independent with respect to [Client Company Name] and will have completed our review as of [Date].
We look forward to working with you.
Sincerely,
[Your Name/Firm Name]
Aicpa Sample Review Engagement Letter for a Non-Profit Organization
Dear [Board Treasurer Name],
This engagement letter outlines the terms for our review of the financial statements of [Non-Profit Organization Name] for the fiscal year ended [Date]. We understand that you require a review to provide assurance that there are no known material modifications that should be made to the financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.
Our review will consist of inquiries of [Non-Profit Organization Name]'s personnel and analytical procedures applied to the financial data. It is substantially less in scope than an audit, the objective of which is to express an opinion on the financial statements. Accordingly, we will not express an opinion or any other form of assurance on the financial statements.
We will also require representations from management about the completeness and accuracy of the information provided.
Sincerely,
[Your Name/Firm Name]
Aicpa Sample Review Engagement Letter for a Startup Company
Dear [Founder Name],
This letter confirms our agreement to perform a review of the financial statements for [Startup Company Name] for the period [Start Date] to [End Date]. As a growing startup, our goal is to provide you with comfort that the financial statements are presented fairly, based on the information you provide and our inquiries.
The review will involve inquiries and analytical procedures, not a full audit. This means we will not be testing internal controls or performing detailed testing of transactions. Our report will state that, based on our review, we are not aware of any material modifications that should be made to the financial statements.
Please provide us with access to all necessary accounting records and personnel.
Sincerely,
[Your Name/Firm Name]
Aicpa Sample Review Engagement Letter for a Company Considering Financing
Dear [CEO Name],
We are pleased to outline the scope of our engagement to perform a review of the financial statements of [Company Name] for the fiscal year ended [Date]. We understand that these financial statements are being prepared to support your upcoming financing efforts.
Our review will be conducted in accordance with the AICPA's standards for review services. The objective is to provide limited assurance that we are not aware of any material modifications that should be made to the financial statements for them to be in conformity with generally accepted accounting principles. It is important to note that a review is not an audit and therefore does not provide the same level of assurance.
We will require your cooperation in providing documentation and responding to our inquiries promptly.
Sincerely,
[Your Name/Firm Name]
Aicpa Sample Review Engagement Letter for a Subsidiary of a Larger Entity
Dear [Finance Manager Name],
This engagement letter confirms our agreement to perform a review of the financial statements of [Subsidiary Name] for the period ending [Date]. We understand that these statements will be consolidated into the financial statements of its parent company, [Parent Company Name].
Our review procedures will include inquiries of [Subsidiary Name]'s management and employees, and analytical procedures applied to financial data. The scope of this review is limited, and it does not provide the assurance that would be obtained in an audit.
We will rely on the information provided by your company's management and any intercompany confirmations required.
Sincerely,
[Your Name/Firm Name]
Aicpa Sample Review Engagement Letter for Tax Planning Purposes
Dear [Tax Director Name],
We propose to perform a review of the financial statements of [Company Name] for the year ended [Date]. While our primary objective is not to provide assurance for tax filing purposes, the review procedures can offer a level of comfort regarding the accuracy of the financial information that underpins your tax planning activities.
Please be advised that a review is not an audit, and it will not uncover all errors or omissions that might be relevant to tax compliance. However, the inquiries and analytical procedures will help identify any obvious misstatements.
We will need access to your tax return preparer's workpapers to ensure coordination.
Sincerely,
[Your Name/Firm Name]
Aicpa Sample Review Engagement Letter for Internal Management Reporting
Dear [Chief Operating Officer Name],
This letter details our engagement to conduct a review of the financial statements of [Company Name] for the period ending [Date]. The purpose of this review is to provide internal management with assurance regarding the reasonableness of the financial information used for strategic decision-making.
Our review will consist of inquiries and analytical procedures designed to identify any material misstatements. It is important to understand that this is not an audit, and therefore, it does not provide the same level of assurance. The outcome will be a report stating whether we are aware of any material modifications needed.
We will require your team's full cooperation in providing access to relevant data and personnel.
Sincerely,
[Your Name/Firm Name]
Aicpa Sample Review Engagement Letter for a Company Undergoing a Change in Ownership
Dear [Acquirer's Representative Name],
We understand that [Acquiring Company Name] is considering the acquisition of [Target Company Name]. As part of your due diligence process, we propose to perform a review of the financial statements of [Target Company Name] for the period ending [Date].
Our review will be conducted in accordance with AICPA standards. The objective is to provide limited assurance that we are not aware of any material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles. This is not an audit and therefore does not provide the same level of assurance as an audit.
We will focus on the financial information that is critical for your valuation and assessment of the acquisition.
Sincerely,
[Your Name/Firm Name]
In conclusion, the Aicpa Sample Review Engagement Letter is more than just a formality; it's a cornerstone of a successful and transparent financial review process. By clearly defining the scope, responsibilities, and limitations of the engagement, both accountants and clients can navigate the review process with confidence, fostering a strong professional relationship built on mutual understanding and clear expectations.