Illustrative Audit Engagement Letter Template (Page 3 of 5) in pdf

by management or employees acting on behalf of the entity. Because the determination of abuse is

subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of

detecting abuse.

Because an audit is designed to provide reasonable, but not absolute assurance, and because we will

not perform a detailed examination of all transactions, there is a risk that material misstatements or

noncompliance may exist and not be detected by us. In addition, an audit is not designed to detect

immaterial misstatements or violations of laws or governmental regulations that do not have a direct and

material effect on the financial statements or major programs. However, if during the course of our audit

we become aware of such errors, fraud, or illegal acts, we will bring them to your attention and also

notify the Legislative Auditor in writing. Furthermore, should we become aware of fraud or illegal acts;

we shall also notify the appropriate enforcement agency. Our responsibility as auditors is limited to the

period covered by our audit and does not extend to any later periods for which we are not engaged as

auditors.

Our procedures will include tests of documentary evidence supporting the transactions recorded in the

accounts, and may include tests of the physical existence of inventories, and direct confirmation of

receivables and certain other assets and liabilities by correspondence with selected individuals, funding

sources, creditors, and financial institutions. We will request written representations from your attorneys

as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our

audit, we will require certain written representations from you abut the financial statements and related

matters.

Audit Procedures—Internal Controls Our audit will include obtaining an understanding of the entity

and its environment, including internal control, sufficient to assess the risks of material misstatement of

the financial statements and to design the nature, timing, and extent of further audit procedures. Tests

of controls may be performed to test the effectiveness of certain controls that we consider relevant to

preventing and detecting errors and fraud that are material to the financial statements, and to preventing

and detecting misstatements resulting from illegal acts and other noncompliance matters that have a

direct and material effect on the financial statements. Our tests, if performed, will be less in scope than

would be necessary to render an opinion on internal control and, accordingly, no opinion will be

expressed in our report on internal control issued pursuant to Government Auditing Standards.

As required by OMB Circular A-133, we will perform tests of controls over compliance to evaluate the

effectiveness of the design and operation of controls that we consider relevant to preventing or detecting

material noncompliance with compliance requirements applicable to each major federal award program.

However, our tests will be less in scope than would be necessary to render an opinion on those controls

and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to OMB

Circular A-133.

An audit is not designed to provide assurance on internal control or to identify significant deficiencies.

However, during the audit, we will communicate to management and those charged with governance

internal control related matters that are required to be communicated under AICPA professional

standards, Government Auditing Standards, and OMB Circular A-133.

Audit Procedures—Compliance

As part of obtaining reasonable assurance about whether the

financial statements are free of material misstatement, we will perform tests of compliance with

applicable laws and regulations and the provisions of contracts and agreements, including grant

agreements. However, the objective of those procedures will not be to provide an opinion on overall

compliance and we will not express such an opinion in our report on compliance issued pursuant to

Government Auditing Standards.

We also plan to obtain reasonable assurance about whether the auditee has complied with applicable

laws and regulations and the provisions of contracts and grant agreements applicable to major

programs.

Our procedures will consist of tests of transactions and other applicable procedures

described in the OMB Circular A-133 Compliance Supplement for the types of compliance requirements

Illustrative Audit Engagement Letter Template Page 3

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