Understanding the purpose and content of a Sample Review Engagement Letter is crucial for both clients and accounting professionals. This document serves as the formal agreement outlining the scope of work, responsibilities, and objectives of a financial review. By clearly defining these elements upfront, both parties can ensure a smooth and successful engagement, minimizing misunderstandings and fostering trust.
Understanding the Core of a Sample Review Engagement Letter
A Sample Review Engagement Letter is more than just a formality; it's the bedrock of a professional relationship. It clearly articulates what the accountant will and will not do, and what the client is expected to provide.
The importance of this letter cannot be overstated, as it sets the stage for a transparent and efficient review process.
It typically includes:
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A clear statement of the objective of the review engagement.
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The services that will be performed, such as inquiry and analytical procedures.
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The limitations of a review engagement compared to an audit.
Key Components of the Letter
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Engagement Scope:
This section details the specific financial statements or periods being reviewed.
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Accountant's Responsibilities:
This outlines the professional standards the accountant will follow and the procedures they will undertake.
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Client's Responsibilities:
This includes providing access to records, management representations, and timely responses to inquiries.
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Element
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Description
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Objective
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To provide assurance that no material modifications need to be made to the financial statements.
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Procedures
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Inquiries of personnel and analytical procedures.
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Sample Review Engagement Letter for a Small Business
Here is an example of a Sample Review Engagement Letter tailored for a small business:
Dear [Client Name],
This letter confirms our understanding of the services we are to perform for [Client Company Name] for the fiscal year ended [Date]. Our objective is to perform a review of the accompanying financial statements of [Client Company Name] as of [Date] and for the year then ended. We will conduct our review in accordance with Statements on Standards for Accounting and Review Services (SSARS) promulgated by the American Institute of Certified Public Accountants (AICPA). We will not perform an audit or any other type of examination, and accordingly, we will not express an opinion or any other form of assurance on the accompanying financial statements.
Our review will consist of inquiries of company personnel and analytical procedures applied to financial data. A review is substantially less in scope than an audit, the objective of which is to express an opinion about the compliance of the financial statements with generally accepted accounting principles. Accordingly, we do not express an opinion or any other form of assurance on the accompanying financial statements. We will not be required to perform any procedures to verify, corroborate, or review evidential matter or to provide assurance on internal controls.
We look forward to working with you. Please sign and return a copy of this letter to indicate your agreement with our understanding of this engagement.
Sincerely,
[Your Accounting Firm Name]
[Your Name]
Sample Review Engagement Letter for a Non-Profit Organization
This Sample Review Engagement Letter is designed for a non-profit organization:
Dear [Client Name],
This letter is to confirm our engagement to perform a review of the financial statements of [Non-Profit Organization Name] for the fiscal year ended [Date]. This review will be conducted in accordance with SSARS as issued by the AICPA. Our objective is to express limited assurance that there are no material modifications that need to be made to the financial statements in order for them to be in conformity with [Specify Accounting Basis, e.g., Generally Accepted Accounting Principles (GAAP)].
A review engagement involves performing inquiry and analytical procedures. We will inquire of [Client Contact Person] and other personnel of [Non-Profit Organization Name] regarding their knowledge of significant accounting matters and events and will perform analytical procedures to identify relationships and trends that seem unusual. We will not perform an audit, which would involve obtaining an understanding of internal control sufficient to plan and perform the audit, and procedures designed to test the validity and accuracy of information.
We request that you provide us with written representations concerning the financial statements, including acknowledgments of management's responsibility for the fair presentation of the financial statements.
Sincerely,
[Your Accounting Firm Name]
[Your Name]
Sample Review Engagement Letter for a Startup Company
A Sample Review Engagement Letter for a startup might look like this:
Dear [Client Name],
Thank you for engaging [Your Accounting Firm Name] to perform a review of the financial statements of [Startup Company Name] for the period ended [Date]. This engagement will be conducted in accordance with SSARS, and our objective is to provide limited assurance that the financial statements are free from material misstatement.
Our review procedures will include inquiries of management and staff, and analytical procedures applied to financial data. We will focus on understanding your business operations and financial systems to identify potential areas of concern. Please note that a review is not an audit, and therefore, we will not express an opinion on the fairness of the financial statements. We will, however, alert you to any significant issues that come to our attention.
We require your full cooperation in providing all requested information and access to personnel. We will also require management representations confirming the accuracy and completeness of the information provided.
Sincerely,
[Your Accounting Firm Name]
[Your Name]
Sample Review Engagement Letter for Clarifying Limitations
This Sample Review Engagement Letter highlights specific limitations:
Dear [Client Name],
This letter outlines our agreement to perform a review of the financial statements of [Client Company Name] for the fiscal year ended [Date]. As previously discussed, it is important to understand the limitations inherent in a review engagement. Our procedures will be limited to inquiries and analytical procedures, and will not include a detailed examination of supporting documentation or an assessment of internal controls.
Therefore, our review is not designed to detect all errors or irregularities that may exist, nor can we provide assurance that we will uncover all material misstatements. If our review reveals any significant issues, we will communicate them to you promptly. However, the absence of any communication regarding a specific matter does not imply that it is free from misstatement.
We are relying on the accuracy and completeness of the financial information provided by management.
Sincerely,
[Your Accounting Firm Name]
[Your Name]
Sample Review Engagement Letter for a Specific Period
A Sample Review Engagement Letter focusing on a specific period:
Dear [Client Name],
We are pleased to confirm our engagement to perform a review of the interim financial statements of [Client Company Name] for the [Quarter/Period] ended [Date]. This review is being performed in accordance with SSARS. The purpose of this engagement is to provide limited assurance that we are not aware of any material modifications that need to be made to the accompanying interim financial statements in order for them to be in conformity with [Specify Accounting Basis, e.g., Generally Accepted Accounting Principles (GAAP)].
Our review procedures will be substantially the same as those described for annual reviews, focusing on inquiries and analytical procedures. Please be aware that interim reviews provide a lower level of assurance than annual reviews or audits. We will communicate any significant findings to you.
We appreciate your cooperation in providing us with the necessary information in a timely manner.
Sincerely,
[Your Accounting Firm Name]
[Your Name]
Sample Review Engagement Letter for Clarifying Fees
This Sample Review Engagement Letter addresses fee structure:
Dear [Client Name],
This letter confirms our agreement to perform a review of the financial statements of [Client Company Name] for the fiscal year ended [Date]. Our professional fees for this engagement are estimated to be [Fee Amount] or at our standard hourly rates. This estimate is based on our current understanding of the scope of work and the complexity of your financial records.
We will bill you for services rendered on a [e.g., monthly, quarterly] basis. Invoices will detail the services performed and the time spent. Any out-of-pocket expenses incurred on your behalf, such as travel or printing, will be billed separately. While we strive to provide accurate fee estimates, unforeseen circumstances or a significant change in the scope of work may necessitate adjustments to our fees. We will communicate any such changes to you in advance.
We look forward to providing you with our professional services.
Sincerely,
[Your Accounting Firm Name]
[Your Name]
Sample Review Engagement Letter for Defining Management's Role
A Sample Review Engagement Letter emphasizing management's role:
Dear [Client Name],
This letter confirms our engagement to perform a review of the financial statements of [Client Company Name] for the fiscal year ended [Date]. A critical component of this engagement is the active participation and responsibility of your management team. You are responsible for the preparation and fair presentation of the financial statements in accordance with [Specify Accounting Basis, e.g., Generally Accepted Accounting Principles (GAAP)].
This responsibility includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement. You are also responsible for providing us with all the financial records, relevant documentation, and unrestricted access to personnel. Furthermore, you will be required to provide us with written management representations confirming the completeness and accuracy of the information provided to us.
Sincerely,
[Your Accounting Firm Name]
[Your Name]
Sample Review Engagement Letter for Obtaining Management Representations
This Sample Review Engagement Letter focuses on the representation letter:
Dear [Client Name],
As part of our review engagement for the financial statements of [Client Company Name] for the fiscal year ended [Date], it is a standard requirement that we obtain written representations from management. These representations are essential for corroborating information provided to us during the review and for confirming your responsibilities concerning the financial statements.
We will request a management representation letter that will include acknowledgments regarding the completeness and accuracy of the financial statements, that all transactions have been recorded, and that there are no uncorrected misstatements. These representations assist us in forming a conclusion about whether any material modifications need to be made to the financial statements.
We appreciate your cooperation in providing these representations promptly once the financial statements are prepared.
Sincerely,
[Your Accounting Firm Name]
[Your Name]
Sample Review Engagement Letter for Post-Review Follow-up
A Sample Review Engagement Letter outlining follow-up procedures:
Dear [Client Name],
Following the completion of our review of the financial statements of [Client Company Name] for the fiscal year ended [Date], we will schedule a meeting to discuss our findings. During this meeting, we will present our review report and address any questions you may have. We will also highlight any areas where we identified potential improvements or concerns.
If, after our review, you become aware of any information that might affect the financial statements previously submitted, it is your responsibility to inform us so that we may consider its effect. We are available for further consultation should you require additional accounting assistance beyond the scope of this review engagement.
Sincerely,
[Your Accounting Firm Name]
[Your Name]
In conclusion, a well-crafted Sample Review Engagement Letter is an indispensable tool for establishing a clear and productive working relationship between an accountant and their client. It not only defines the parameters of the review but also instills confidence and mutual understanding, leading to a more efficient and satisfactory engagement for all parties involved.