In this article, we’ll provide a Sample Review Engagement Letter that you can use as a template for your own projects. Feel free to edit the letter as needed to fit your specific needs and requirements. Before using this letter, be sure to review and revise it to meet the specific requirements of your engagement.
Structure of a Sample Review Engagement Letter
A sample review engagement letter is a formal document that outlines the terms and conditions of an engagement between a client and an accountant. When you need a review of your financial statements, you can hire an accountant to perform this service. The engagement letter serves as a roadmap for the engagement, defining the specific objectives, responsibilities, and limitations of both parties to ensure a successful outcome. Let’s explore the essential elements of a sample review engagement letter.
Essential Elements of a Sample Review Engagement Letter
- Engagement Objective: Clearly state the primary purpose of the review engagement. Specify that the objective is to provide limited assurance on the financial statements, expressing whether anything came to the accountant’s attention that causes them to believe the financial statements are materially misstated.
- Management’s Responsibilities: Emphasize that management is responsible for the preparation and presentation of the financial statements in accordance with the applicable financial reporting framework, such as GAAP or IFRS. Management must ensure that the financial statements are free from material misstatement, whether due to fraud or error.
- Accountant’s Responsibilities: Outline the procedures the accountant will perform to obtain limited assurance on the financial statements. These procedures typically include inquiries, analytical procedures, and limited testing of transactions and balances. Specify that the review is not an audit and does not provide a full assurance opinion.
- Limitations of the Review: Clearly communicate that the review is not a substitute for an audit, which provides a higher level of assurance. The accountant is not responsible for detecting all errors or fraud in the financial statements, and the engagement is subject to inherent limitations.
- Fees and Billing: Specify the fees to be charged for the engagement and the billing terms. Include whether the fees are fixed or subject to change based on the actual time and effort required.
- Confidentiality: Assure the client that the accountant will maintain the confidentiality of all information obtained during the engagement and will not disclose it to third parties without the client’s consent.
- Client Representation: Request a written representation letter from the client confirming their understanding of the scope and limitations of the review engagement and acknowledging their responsibility for the accuracy and completeness of the financial statements.
- Termination and Amendment: Include provisions for terminating or amending the engagement. Specify the conditions under which either party can terminate the engagement and the process for amending the terms of the engagement.
- Applicable Laws and Regulations: State that the engagement will be conducted in accordance with the relevant laws, regulations, and professional standards. This includes adhering to ethical requirements and maintaining independence from the client.
By including these essential elements, a sample review engagement letter provides a clear understanding between the client and the accountant, establishing a solid foundation for a successful engagement.
Sample Review Engagement Letters
Review of Financial Statements
Dear [Client Name],
This letter serves as a formal engagement letter between [Your Firm Name] and [Client Name] for the purpose of conducting a review of your financial statements for the fiscal year ending [Date].
We are pleased to provide you with this review engagement, which is intended to provide limited assurance about whether the financial statements are prepared, in all material respects, in accordance with [Applicable Financial Reporting Framework].
The scope of our review will include the following procedures:
- Inquiring of management and others within the entity
- Performing analytical procedures
- Evaluating the appropriateness of accounting policies used and significant accounting estimates
- Reading the financial statements and comparing them with the underlying documentation
Based on the results of our review, we will issue a review report that will express our limited assurance conclusion.
Our fees for this engagement will be [Fee Amount] plus applicable taxes.
To proceed with this engagement, please sign and return a copy of this letter by [Date].
We look forward to working with you and providing you with a high-quality review engagement.
Sincerely,
[Your Name]
Review of Controls Specified by Management
Dear [Client Name],
This letter serves as a formal engagement letter between [Your Firm Name] and [Client Name] for the purpose of conducting a review of controls specified by management over [Specified Controls].
We are pleased to provide you with this review engagement, which is intended to provide limited assurance that the management controls you have designed and implemented are appropriately designed to prevent, detect, or correct material misstatements in the financial statements.
The scope of our review will include the following procedures:
- Inquiring of management and others within the entity
- Performing analytical procedures
- Observing the application of controls
- Testing the controls
Based on the results of our review, we will issue a review report that will express our limited assurance conclusion.
Our fees for this engagement will be [Fee Amount] plus applicable taxes.
To proceed with this engagement, please sign and return a copy of this letter by [Date].
We look forward to working with you and providing you with a high-quality review engagement.
Sincerely,
[Your Name]
Review of Interim Financial Information
Dear [Client Name],
This letter serves as a formal engagement letter between [Your Firm Name] and [Client Name] for the purpose of conducting a review of interim financial information for the period ending [Date].
We are pleased to provide you with this review engagement, which is intended to provide limited assurance that the interim financial information is prepared, in all material respects, in accordance with [Applicable Financial Reporting Framework].
The scope of our review will include the following procedures:
- Inquiring of management and others within the entity
- Performing analytical procedures
- Evaluating the appropriateness of accounting policies used and significant accounting estimates
- Reading the interim financial information and comparing it with the underlying documentation
Based on the results of our review, we will issue a review report that will express our limited assurance conclusion.
Our fees for this engagement will be [Fee Amount] plus applicable taxes.
To proceed with this engagement, please sign and return a copy of this letter by [Date].
We look forward to working with you and providing you with a high-quality review engagement.
Sincerely,
[Your Name]
Review of Compliance with Laws and Regulations
Dear [Client Name],
This letter serves as a formal engagement letter between [Your Firm Name] and [Client Name] for the purpose of conducting a review of compliance with laws and regulations specified by management.
We are pleased to provide you with this review engagement, which is intended to provide limited assurance that the entity has complied, in all material respects, with the laws and regulations specified by management.
The scope of our review will include the following procedures:
- Inquiring of management and others within the entity
- Performing analytical procedures
- Observing the entity’s compliance with laws and regulations
- Testing the entity’s compliance with laws and regulations
Based on the results of our review, we will issue a review report that will express our limited assurance conclusion.
Our fees for this engagement will be [Fee Amount] plus applicable taxes.
To proceed with this engagement, please sign and return a copy of this letter by [Date].
We look forward to working with you and providing you with a high-quality review engagement.
Sincerely,
[Your Name]
Review of Prospective Financial Information
Dear [Client Name],
This letter serves as a formal engagement letter between [Your Firm Name] and [Client Name] for the purpose of conducting a review of prospective financial information.
We are pleased to provide you with this review engagement, which is intended to provide limited assurance that the prospective financial information is prepared, in all material respects, in accordance with [Applicable Financial Reporting Framework].
The scope of our review will include the following procedures:
- Inquiring of management and others within the entity
- Performing analytical procedures
- Evaluating the appropriateness of assumptions used and significant accounting estimates
- Reading the prospective financial information and comparing it with the underlying documentation
Based on the results of our review, we will issue a review report that will express our limited assurance conclusion.
Our fees for this engagement will be [Fee Amount] plus applicable taxes.
To proceed with this engagement, please sign and return a copy of this letter by [Date].
We look forward to working with you and providing you with a high-quality review engagement.
Sincerely,
[Your Name]
Review of Social Responsibility Information
Dear [Client Name],
This letter serves as a formal engagement letter between [Your Firm Name] and [Client Name] for the purpose of conducting a review of social responsibility information.
We are pleased to provide you with this review engagement, which is intended to provide limited assurance that the social responsibility information is prepared, in all material respects, in accordance with [Applicable Social Responsibility Reporting Framework].
The scope of our review will include the following procedures:
- Inquiring of management and others within the entity
- Performing analytical procedures
- Evaluating the appropriateness of reporting criteria and significant estimates
- Reading the social responsibility information and comparing it with the underlying documentation
Based on the results of our review, we will issue a review report that will express our limited assurance conclusion.
Our fees for this engagement will be [Fee Amount] plus applicable taxes.
To proceed with this engagement, please sign and return a copy of this letter by [Date].
We look forward to working with you and providing you with a high-quality review engagement.
Sincerely,
[Your Name]
Review of Internal Controls over Financial Reporting
Dear [Client Name],
This letter serves as a formal engagement letter between [Your Firm Name] and [Client Name] for the purpose of conducting a review of internal controls over financial reporting as of [Date].
We are pleased to provide you with this review engagement, which is intended to provide reasonable assurance that the internal
Sample Review Engagement Letter: Related Tips
To ensure clarity and protection in a sample review engagement, consider these tips:
1. Define the Scope of the Review
- Specify the specific financial statements or data to be reviewed.
- Outline the period covered by the review.
- Indicate any limitations or exclusions to the review.
2. Clarify the Accountant’s Responsibilities
- Explain the nature, extent, and limitations of the review procedures to be performed.
- State that the review is not an audit and does not provide assurance on the financial statements.
- Highlight the accountant’s responsibility to report any material modifications needed to the financial statements.
3. Specify the Client’s Responsibilities
- Require the client to provide timely access to all relevant records, documentation, and personnel.
- Emphasize the client’s responsibility for the accuracy and completeness of the financial statements.
- Request the client’s cooperation in resolving any inquiries or issues arising during the review.
4. Address Fees and Billing
- Specify the fees for the review engagement and any additional charges for unexpected circumstances.
- Outline the billing terms, including the payment schedule and method of payment.
- Include any applicable taxes or surcharges.
5. Maintain Confidentiality and Independence
- Assure the client of the accountant’s commitment to confidentiality and professional ethics.
- Disclose any potential conflicts of interest or relationships that could impair independence.
- Follow relevant ethical guidelines and regulations governing the review engagement.
6. Seek Legal Advice
- Recommend that the client consult with legal counsel to ensure compliance with applicable laws and regulations.
- Address any legal implications or requirements related to the review engagement.
7. Review Engagement Letter Format
- Use clear and concise language that is easily understood by the client.
- Organize the letter in a logical format, with numbered paragraphs and subheadings.
- Include the date, names of the parties involved, and signatures to validate the agreement.
8. Obtain Written Agreement
- Request the client to sign the review engagement letter to acknowledge their understanding and acceptance of its terms.
- Keep a copy of the signed letter for your records.
By incorporating these tips into your sample review engagement letter, you can enhance clarity, align expectations, and protect both the accountant and the client’s interests throughout the review process.
Sample Review Engagement Letter FAQs
What is a sample review engagement letter?
A sample review engagement letter is a document that outlines the terms of an engagement between an auditor and a client for a review of financial statements. It includes information such as the scope of the review, the responsibilities of the auditor and the client, and the fees to be charged.
Why is a sample review engagement letter important?
A sample review engagement letter is important because it helps to ensure that both the auditor and the client are clear on the terms of the engagement. It also helps to protect the auditor from liability in the event of a dispute.
What are the key terms that should be included in a sample review engagement letter?
The key terms that should be included in a sample review engagement letter include the scope of the review, the responsibilities of the auditor and the client, the fees to be charged, and the effective date of the engagement.
What is the difference between a review and an audit?
A review is a less extensive examination of financial statements than an audit. A review is designed to provide limited assurance that the financial statements are free from material misstatement. An audit is a more extensive examination of financial statements that is designed to provide reasonable assurance that the financial statements are free from material misstatement.
What are the responsibilities of the auditor in a review engagement?
The responsibilities of the auditor in a review engagement include obtaining a general understanding of the client’s business and industry, performing analytical procedures, making inquiries of the client’s management and staff, and reading the financial statements. The auditor is also responsible for issuing a written report that expresses limited assurance on the financial statements.
What are the responsibilities of the client in a review engagement?
The responsibilities of the client in a review engagement include providing the auditor with access to all relevant records and information, responding to the auditor’s inquiries, and assisting the auditor in obtaining a general understanding of the client’s business and industry.
What are the fees typically charged for a review engagement?
The fees typically charged for a review engagement are based on the size and complexity of the client’s business. The fees are typically charged on an hourly basis.
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