When engaging a Certified Public Accountant (CPA) for a review of your financial statements, a clear understanding of the scope of work and responsibilities is crucial. This is where a Cpa Review Engagement Letter Sample becomes an invaluable tool. It serves as a formal agreement, outlining what the CPA will do, what the client needs to provide, and the expectations for both parties. This document ensures that both the accountant and the business owner are on the same page, preventing misunderstandings and setting a foundation for a successful working relationship.
Understanding Your Cpa Review Engagement Letter Sample
A Cpa Review Engagement Letter Sample is more than just a formality; it's a critical document that defines the parameters of the accounting services to be provided. It typically details the objective of the review engagement, which is to obtain limited assurance that there are no material modifications that should be made to the financial statements for them to be in conformity with the applicable financial reporting framework. The importance of a well-drafted engagement letter cannot be overstated, as it protects both the CPA and the client by clearly defining expectations and responsibilities.
Key components of a typical Cpa Review Engagement Letter Sample often include:
- Identification of the client and the CPA firm.
- A clear description of the services to be performed (i.e., a review engagement).
- The period the financial statements cover.
- The applicable financial reporting framework (e.g., Generally Accepted Accounting Principles - GAAP).
- The responsibilities of management and the CPA.
- A statement that a review is substantially less in scope than an audit and does not provide an opinion.
- The CPA's independence.
- Fees and billing arrangements.
- Termination clauses.
Consider the following table to illustrate the differing levels of assurance:
| Service | Level of Assurance | Objective |
|---|---|---|
| Audit | Reasonable Assurance | Express an opinion on whether the financial statements are presented fairly, in all material respects. |
| Review | Limited Assurance | Obtain limited assurance that there are no material modifications needed for the financial statements to conform to the applicable financial reporting framework. |
| Compilation | No Assurance | Present financial information in the form of financial statements, prepared from the books and records of the client, without undertaking any procedures to verify, corroborate, or review the information. |
Cpa Review Engagement Letter Sample for a Small Business Startup
Dear [Client Name],
This letter confirms our understanding of the services we will provide to [Startup Name] for the fiscal year ending [Date]. We will perform a review of the accompanying financial statements, which comprise the balance sheet as of [Date], and the related statements of income, retained earnings, and cash flows for the year then ended. Our services will be performed in accordance with Statements on Standards for Accounting and Review Services (SSARS) issued by the American Institute of Certified Public Accountants (AICPA).
A review engagement consists principally of inquiries of company personnel and analytical procedures applied to the financial data. Our review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we will not express an opinion or any other form of assurance on the accompanying financial statements.
We look forward to assisting you. Please sign and return a copy of this letter to indicate your agreement with these terms.
Sincerely,
[CPA Firm Name]
Cpa Review Engagement Letter Sample for a Non-Profit Organization
Dear [Board President Name],
This letter outlines the scope of our engagement to perform a review of the financial statements of [Non-Profit Organization Name] for the fiscal year ended [Date]. We will perform our review in accordance with SSARS promulgated by the AICPA. Our objective is to provide limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with the basis of accounting prescribed by [Specific Accounting Standard for Non-Profits, e.g., FASB ASC 958].
We understand that [Non-Profit Organization Name] requires a review engagement to meet reporting requirements for grant applications and regulatory filings. Please be aware that a review does not include procedures necessary to express an opinion on the financial statements, nor does it involve an examination of the organization's internal controls. Our responsibilities include communicating any significant findings to management and the board.
We are independent with respect to [Non-Profit Organization Name] and will maintain our independence throughout the engagement. We estimate our professional fees for this review engagement to be approximately [Fee Estimate] based on our anticipated time and complexity. We will bill you on a monthly basis.
Please confirm your understanding of these terms by signing and returning a copy of this letter.
Sincerely,
[CPA Firm Name]
Cpa Review Engagement Letter Sample for a Company Transitioning to a New Accounting Standard
Dear [CFO Name],
This engagement letter confirms our agreement to perform a review of the financial statements of [Company Name] for the fiscal year ending [Date]. As you are aware, [Company Name] will be transitioning to [New Accounting Standard Name] for the upcoming reporting period. Our review will be conducted in accordance with SSARS, and we will provide limited assurance that the financial statements are free from material misstatement, with specific attention to the application and presentation of [New Accounting Standard Name].
Our review will involve inquiries and analytical procedures. We will discuss with you the accounting policies and practices applied, including the methods used to account for the transition to [New Accounting Standard Name]. We will also perform procedures to assess the reasonableness of management's estimates and judgments related to the new standard.
It is crucial for management to provide us with all necessary documentation and explanations related to the adoption of [New Accounting Standard Name]. This includes detailed analysis of the impact of the new standard on your financial position and results of operations. We will work collaboratively with your accounting team to ensure a smooth and accurate review process.
We look forward to working with you on this important transition. Please sign and return this letter to confirm your acceptance.
Sincerely,
[CPA Firm Name]
Cpa Review Engagement Letter Sample for Year-End Financial Statement Preparation
Dear [Owner Name],
This letter confirms our engagement to perform a review of the year-end financial statements for [Business Name] for the period ending [Date]. Our objective is to provide you with limited assurance that the financial statements are presented in accordance with [Applicable Financial Reporting Framework, e.g., GAAP].
In performing our review, we will:
- Inquire of personnel responsible for financial and accounting matters.
- Perform analytical procedures to identify unusual fluctuations or relationships.
- Read the financial statements and consider whether they are consistent with our knowledge of your business.
Please note that this review is not an audit and will not provide an opinion on the fairness of the financial statements. However, it will provide a level of comfort that the statements are likely accurate and free from significant errors.
We will require access to your accounting records, supporting documents, and relevant personnel. Please let us know your availability for the initial meeting and document gathering process. Our estimated fee for this service is [Fee Estimate].
We appreciate the opportunity to serve you. Kindly sign and return a copy of this letter.
Sincerely,
[CPA Firm Name]
Cpa Review Engagement Letter Sample for Internal Management Reporting
Dear [CEO Name],
This letter details our engagement to conduct a review of the financial statements of [Corporation Name] for internal management reporting purposes for the period ending [Date]. While not intended for external publication, this review aims to provide management with a reasonable level of assurance regarding the accuracy and completeness of the financial information used for decision-making.
Our review procedures will be tailored to the specific needs of internal management and may include more in-depth analysis of certain accounts or operational metrics. We will focus on identifying potential inefficiencies, areas of concern, or opportunities for improvement within the financial reporting process.
We will communicate our findings, significant accounting policies, and any potential adjustments directly to you and the management team. The scope of this review is less than an audit, and therefore, we will not express an opinion on the financial statements.
We are excited to partner with you to enhance your internal financial oversight. Please confirm your agreement by signing below.
Sincerely,
[CPA Firm Name]
Cpa Review Engagement Letter Sample for a Specific Financial Statement Component
Dear [Controller Name],
This letter confirms our agreement to perform a review of the [Specific Financial Statement Component, e.g., Accounts Receivable Aging] of [Company Name] as of [Date]. The purpose of this review is to provide limited assurance that the information presented for this specific component is free from material misstatement.
Our procedures will include inquiries of personnel responsible for managing accounts receivable, analytical procedures to assess the reasonableness of the aging schedule, and testing of specific accounts to verify their accuracy. We will focus on identifying any unusual balances, significant write-offs, or potential issues with collectability.
We will not be performing a full review of the entire financial statements, but rather a focused examination of the [Specific Financial Statement Component]. Our findings will be communicated to you and your team. Please note that this review is not an audit and does not provide an opinion on the overall financial statements.
We are committed to providing you with valuable insights. Kindly return a signed copy of this letter to proceed.
Sincerely,
[CPA Firm Name]
Cpa Review Engagement Letter Sample for Assistance with Loan Covenant Compliance
Dear [Loan Officer Name] and [Client Name],
This letter serves as confirmation of our engagement to perform a review of the financial statements of [Borrower Name] for the period ending [Date]. The primary objective of this review is to provide limited assurance to [Lender Name] that the financial statements are presented in accordance with [Applicable Financial Reporting Framework] and to assist in assessing compliance with loan covenants as outlined in the credit agreement dated [Date of Agreement].
Our review procedures will include inquiries and analytical procedures applied to the financial data. Specifically, we will pay close attention to key financial ratios and metrics relevant to the loan covenants, such as [Example Covenant 1, e.g., Debt-to-Equity Ratio] and [Example Covenant 2, e.g., Current Ratio]. We will communicate any identified deviations from these covenants to both [Borrower Name] and [Lender Name].
We understand that this review is not an audit and will not provide an opinion on the financial statements or an absolute guarantee of covenant compliance. However, it will provide a professional assessment of the financial information.
We appreciate the opportunity to assist in this matter. Please sign and return this letter to confirm your agreement.
Sincerely,
[CPA Firm Name]
On behalf of [Borrower Name]
Cpa Review Engagement Letter Sample for a Potential Investor Inquiry
Dear [Investor Name],
This letter is to confirm the engagement of [CPA Firm Name] to perform a review of the financial statements of [Company Name] for the fiscal year ended [Date]. This review is being conducted at the request of [Company Name] to provide potential investors, such as yourself, with limited assurance regarding the financial health of the company.
Our review will consist of inquiries and analytical procedures performed in accordance with SSARS. While this review is less extensive than an audit and does not provide an opinion, it will offer a professional assessment of whether the financial statements are presented fairly in conformity with [Applicable Financial Reporting Framework]. We will focus on the significant accounts and disclosures that are typically of interest to investors.
We will make our findings available to [Company Name] for distribution to you and any other prospective investors. Please be aware that the scope of our engagement is limited, and we encourage you to conduct your own due diligence in addition to reviewing these financials.
We are committed to providing accurate and professional services. Please acknowledge your understanding of the nature of this engagement by signing and returning a copy of this letter.
Sincerely,
[CPA Firm Name]
On behalf of [Company Name]
Cpa Review Engagement Letter Sample for Fraud Detection Assistance
Dear [CEO Name],
This letter confirms our engagement to perform a review of the financial statements of [Company Name] for the period ending [Date], with a specific focus on assisting in the detection of potential fraud. While a review engagement is not designed to provide assurance that fraud will be detected, our procedures will be enhanced to identify red flags and anomalies that may indicate fraudulent activity.
Our review will include inquiries about management's knowledge of any suspected fraud, review of accounting policies and procedures, and analytical procedures applied to financial data. We will also perform specific procedures aimed at uncovering unusual transactions or inconsistencies that might be indicative of fraud. If any potential fraudulent activity is identified, we will promptly communicate our findings to management and the appropriate governing body.
It is important to understand that our review is not an exhaustive investigation or forensic audit. However, it is intended to provide a higher level of scrutiny than a standard review engagement. Management's cooperation in providing all requested information and explanations is essential for the success of this engagement.
We are dedicated to helping you safeguard your company's assets. Please sign and return this letter to confirm your agreement.
Sincerely,
[CPA Firm Name]
Cpa Review Engagement Letter Sample for Ongoing Monthly Financial Analysis
Dear [Manager Name],
This letter details our ongoing engagement to provide monthly review and analysis of the financial statements for [Department Name] within [Organization Name]. Our objective is to offer management with timely insights into the financial performance and position of the department, enabling better-informed decision-making.
Each month, we will perform a review of the financial statements, which will include:
- Reviewing variances between actual results and budget.
- Performing trend analysis to identify significant changes.
- Inquiring about any unusual fluctuations or significant transactions.
- Providing a summary report of our findings and recommendations.
This ongoing review is intended to provide regular financial oversight, rather than an assurance on the overall financial statements. The scope will be sufficient to identify material misstatements that could impact management's understanding of the department's financial health.
We are excited to be a part of your continuous financial monitoring. Please sign and return this letter to signify your agreement to this ongoing arrangement.
Sincerely,
[CPA Firm Name]
In conclusion, a Cpa Review Engagement Letter Sample is a vital document that formalizes the relationship between a CPA and their client for review services. It ensures clarity, sets expectations, and protects both parties. By understanding the components and various applications of such a letter, businesses can confidently engage with their CPAs, knowing that the scope of work is well-defined and that they will receive appropriate levels of assurance for their financial reporting needs.