This is to set out the basis on which we
would act as auditors and our respective responsibilities
in respect of the audit.
We are bound by the ethical guidelines of
our professional Institute and may accept instructions to
act for you on the basis that we will act in accordance with
those ethical guidelines.
1.1 Our duty as auditors under the Companies
Act 1985, is to examine and report on the annual accounts
of a company. The directors are responsible for the preparation
of accounts giving a true and fair view, and for the maintenance
of proper accounting records and an appropriate system of
internal control. They are also responsible for making available
to us, as and when required, all the company’s accounting
records and all other relevant records and related information,
including minutes of all management and shareholders’ meetings.
1.2 Our legal and professional duty is to
make a report to the members stating whether, in our opinion,
the financial statements of the company which we have audited
give a true and fair view of the state of the company’s
affairs, and of the profit or loss for the year, and whether
they have been prepared in accordance with the Companies
Act 1985. In arriving at our opinion we are required by law
to consider the following matters, and to report on any in
respect of which we are not satisfied:
a) whether proper accounting records have
been kept by the company and proper returns adequate for
our audit have been received from branches not visited by
us;
b) whether the company’s balance sheet and profit and
loss account are in agreement with the accounting records
and returns;
c) whether we have obtained all the information and explanations
which we think necessary for the purpose of our audit and;
d) whether the information in the directors’ report
is consistent with that in the audited financial statements.
There are certain other matters, which according
to the circumstances, may need to be dealt with in our report.
For example, where the financial statements do not give details
of directors’ remuneration or of their transactions
with the company, the Companies Act 1985 requires us to disclose
such matters in our report.
In addition, we have a professional duty
to report if the financial statements do not comply in any
material respect with Statement of Standard Accounting Practice,
or Financial Reporting Standards, unless in our opinion the
non-compliance is justified in the circumstances. In determining
whether or not the departure is justified, we consider:
a) whether the departure is required in order
for the financial statements to give a true and fair view
and;
b) whether adequate disclosure has been made concerning the
departure.
Our professional duties also include:
a) incorporating in our report a description
of the directors’ responsibilities for the financial
statements, where the accounts or accompanying information
do not include such description and;
b) considering whether other information and documents contained
in the audited accounts are consistent with those financial
statements.
1.3 Our auditing will be carried out in accordance
with the Statements of Auditing Standards issued by the Auditing
Practices Board, and will include such tests of transactions
and of the existence, ownership and valuation of assets and
liabilities as we consider necessary. We will ascertain the
accounting systems in order to assess their adequacy as a
basis of the accounts. We will need to obtain adequate appropriate
audit evidence to enable us to draw reasonable conclusions
there from.
1.4 The nature of our test will vary according
to our assessment of the company’s accounting and internal
control systems, and may cover any aspects of the business’s
operations. We shall report to the management any significant
weakness in, or observations on the company’s systems
which come to our notice and which we think should be brought
to management’s attention. Any such report may not
be provided to the third parties without prior written consent.
Such consent would be granted only on the basis that such
reports are not prepared with the interests of anyone other
than the company in mind and that we accept no duty or responsibility
to any other party as concerns the report.
1.5 The responsibility for safeguarding the
assets of the company and for the prevention and detection
of fraud, error and non-compliance with law or regulations
rests with the management. However, we will plan our audit
so that we have a reasonable expectation of detecting material
misstatements in the accounts resulting from irregularities,
fraud or non-compliance with law or regulations, but our
examination should not be relied upon to disclose all such
material misstatements or frauds, errors or instances of
non-compliance as may exist.
1.6 As part of our normal audit procedures,
we may request you to provide formal representations concerning
certain information and explanations we have received from
you during the course of our audit.
1.7 In order to assist us with a review of
your accounts, which constitutes part of our audit, we will
request sight of any documents or statements, which will
be issued with the financial statements. We are also entitled
to attend all general meetings of the company, and to receive
notice of all such meetings.
1.8 Once we have issued our report we have
no further direct responsibility in relation to the financial
statement for that financial year. However, we expect that
you will inform us of any material event occurring between
the date of our report and that of the annual general meeting,
which may affect the financial statements.
And if applicable
1.9 We appreciate that the present size of
your business renders it uneconomic to create a system of
internal control based on the segregation of duties for different
functions within each are of the business. In the running
of your company we understand that instead the director(s)
is/are closely involved with the control of the company’s
transactions. In planning and performing our audit we shall
take account of this supervision.
2.1 The terms set out here shall take affect
immediately upon your countersigning a letter and returning
it to us or upon the commencement of the audit for the accounting
period, whichever is the earliest.
2.2 Once it has been agreed, the letter will
remain effective until it is replaced.
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