Question

Electronic Engineering, a non-public company, has asked your CPA firm to audit the complete financial statements for Year 2. Your partner has recently asked you to draft an engagement letter for this engagement. This is your first engagement letter and you have referenced other engagement letters as a starting point for drafting the engagement letter.

From the list of statements below, double-click on the shaded cell and select the statement that most likely would be included in the engagement letter. You may only select 8 statements from the list below. Selections should only be utilized once.
Statement 1 Our audit will be conducted with the objective of expressing an unmodified opinion on the financial statements.
Statement 2 We plan to perform substantive analytical procedures for testing warranty expense.
Statement 3 Billings will be rendered on a quarterly basis and are payable upon receipt.
Statement 4 Our fees will be based on the opinion rendered.
Statement 5 As part of our audit process, we will request from management, written confirmation concerning representations made to us in connection with the audit.
Statement 6 Our audit will be conducted on the basis that management acknowledge and understand that they have responsibility for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America.
Statement 7 We will plan and perform an audit in accordance with GAAS, which will discover all material misstatements.
Statement 8 Management will make available to the auditor draft financial statements and any accompanying other information in time to allow us to complete the audit in accordance with the proposed timetable.
Statement 9 Management will provide us with unrestricted access to persons within the entity from whom we determine it necessary to obtain audit evidence.
Statement 10 Management will provide us with access to all information of which management is aware that is relevant to the preparation and fair presentation of the financial statements such as records, documentation, and other matter.
Statement 11 We plan to utilize your internal auditors to determine planning materiality.
Statement 12 We will issue a written report upon completion of our audit of ABC Company's financial statements.
Statement 13 Circumstances may arise in which it is necessary for us to modify our opinion, add an emphasis-of-matter or other-matter paragraph(s), or withdraw from the engagement.
Statements that would most likely be included in the engagement letter:

Answer 1

Electronic Engineering & CPA Firm

Statements that would most likely be included in the engagement letter:

Statement 1 Our audit will be conducted with the objective of expressing an unmodified opinion on the financial statements.

Statement 5 As part of our audit process, we will request from management, written confirmation concerning representations made to us in connection with the audit.

Statement 6 Our audit will be conducted on the basis that management acknowledge and understand that they have responsibility for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America.

Statement 7 We will plan and perform an audit in accordance with GAAS, which will discover all material misstatements.

Statement 8 Management will make available to the auditor draft financial statements and any accompanying other information in time to allow us to complete the audit in accordance with the proposed timetable.

Statement 9 Management will provide us with unrestricted access to persons within the entity from whom we determine it necessary to obtain audit evidence.

Statement 10 Management will provide us with access to all information of which management is aware that is relevant to the preparation and fair presentation of the financial statements such as records, documentation, and other matter.

Statement 13 Circumstances may arise in which it is necessary for us to modify our opinion, add an emphasis-of-matter or other-matter paragraph(s), or withdraw from the engagement.

Step-by-step explanation:

The engagement letter is a formal document which the auditor uses to accept an audit appointment. It details the objective and scope of the audit, the auditor's and management responsibilities, and the form of any reports.

Generally, an engagement letter is an agreement, which is less formal than a contract because it avoids legal jargons but is enforceable in business relationships.