When engaging a Certified Public Accountant (CPA) for a review of your financial statements, a formal understanding of the scope of services, responsibilities, and fees is essential. This is where a CPA review engagement letter sample becomes invaluable. It serves as a clear contract between the CPA firm and the client, ensuring both parties are on the same page and preventing misunderstandings down the line. This article will delve into what makes a good CPA review engagement letter sample and provide examples for various scenarios.
Understanding the Core Components of a CPA Review Engagement Letter Sample
A robust CPA review engagement letter sample is more than just a formality; it's the foundation of a successful professional relationship. It clearly outlines the objectives of the review engagement, which typically involve the CPA performing inquiry and analytical procedures to identify any material modifications that should be made to the financial statements for them to be in conformity with the applicable financial reporting framework. The importance of a well-drafted engagement letter cannot be overstated as it sets expectations and mitigates potential disputes.
Key elements typically found in a CPA review engagement letter sample include:
- The objective and scope of the engagement.
- The responsibilities of both the CPA and the client.
- The basis for fees and billing arrangements.
- A statement that the engagement is not an audit and therefore does not provide an opinion on the financial statements.
- The period covered by the review.
- Confirmation of the financial reporting framework being used.
Consider the following table illustrating typical inclusions:
| Section | Description |
|---|---|
| Services Provided | Review of interim or annual financial statements. |
| Client Responsibilities | Providing access to records, personnel, and relevant information. |
| CPA Responsibilities | Performing inquiry and analytical procedures. |
| Deliverables | A report on the reviewed financial statements. |
Cpa Review Engagement Letter Sample for a New Client Engagement
Dear [Client Name],
Thank you for choosing [CPA Firm Name] to perform a review of your financial statements for the fiscal year ending [Date]. This letter outlines the terms of our engagement and the services we will provide.
Our objective is to perform a review of the accompanying financial statements of [Client Company Name] as of [Date] and for the period then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants (AICPA). A review engagement consists principally of inquiries of company personnel and analytical procedures applied to the financial data. Our procedures are substantially less in scope than an audit engagement, and we will not express an opinion on the financial statements. We will perform our review in accordance with AICPA standards, and our report will be issued on the basis of those standards.
We will require your full cooperation in providing us with all necessary accounting records, financial information, and access to personnel who can provide insights into the financial matters of your company. You are responsible for the accuracy and completeness of the financial statements and for ensuring that they are presented in accordance with [Applicable Financial Reporting Framework, e.g., Generally Accepted Accounting Principles (GAAP)].
Our fee for these services will be based on our hourly rates, estimated to be approximately $[Estimated Fee]. We will provide a detailed invoice upon completion of the engagement. Please sign and return the attached copy of this letter to indicate your agreement with these terms.
Sincerely,
[Your Name/CPA Firm Name]
Cpa Review Engagement Letter Sample for Ongoing Annual Reviews
Dear [Client Name],
This letter confirms our agreement for [CPA Firm Name] to provide review services for [Client Company Name]'s financial statements for the fiscal year ending [Date].
As in previous years, our engagement will consist of performing inquiry and analytical procedures to gain limited assurance that there are no material modifications that need to be made to the financial statements for them to be in conformity with [Applicable Financial Reporting Framework]. This review is not an audit and will not result in an auditor's opinion.
We will rely on your management team to provide accurate and complete financial information, including the trial balance, general ledger, bank reconciliations, and other supporting documentation. You are responsible for the preparation and fair presentation of the financial statements in accordance with [Applicable Financial Reporting Framework].
Our estimated fee for this annual review is $[Estimated Fee]. We will bill you upon completion of our services. We look forward to continuing our professional relationship.
Sincerely,
[Your Name/CPA Firm Name]
Cpa Review Engagement Letter Sample for Interim Financial Statement Reviews
Dear [Client Name],
This letter outlines the scope and terms for our review of [Client Company Name]'s interim financial statements for the [Quarter/Period] ending [Date].
Our review will be conducted in accordance with Statements on Standards for Accounting and Review Services (SSARS) issued by the AICPA. The objective of a review is to provide limited assurance that we are not aware of any material modifications that should be made to the interim financial statements for them to be in conformity with [Applicable Financial Reporting Framework].
We will perform inquiry and analytical procedures. These procedures are significantly less extensive than those performed in an audit. We will require your cooperation in providing timely access to your accounting records and personnel. You are responsible for the accuracy and completeness of the financial statements.
Our fee for this interim review is estimated to be $[Estimated Fee]. We will provide a detailed invoice upon completion. Please confirm your acceptance of these terms.
Sincerely,
[Your Name/CPA Firm Name]
Cpa Review Engagement Letter Sample with Specific Additions
Dear [Client Name],
This letter details our engagement to review the financial statements of [Client Company Name] for the year ended [Date].
In addition to the standard review procedures outlined previously, this engagement will specifically include:
- A detailed review of revenue recognition policies and transactions.
- Analytical procedures focused on significant expense variances compared to prior periods.
- Inquiries regarding any contingent liabilities or commitments.
We will perform these procedures in accordance with AICPA standards. Your responsibility for the financial statements remains paramount.
Our fee for this comprehensive review is estimated at $[Estimated Fee]. We are excited to provide this enhanced level of service.
Sincerely,
[Your Name/CPA Firm Name]
Cpa Review Engagement Letter Sample for a Startup Company
Dear [Client Name],
Welcome to [CPA Firm Name]! We are pleased to be your partner as you establish your financial reporting. This letter outlines our engagement for a review of [Client Company Name]'s initial financial statements for the period ending [Date].
Our review will focus on ensuring your financial statements are presented in accordance with [Applicable Financial Reporting Framework, e.g., startup accounting best practices or a simplified GAAP presentation]. We will conduct inquiry and analytical procedures to provide limited assurance.
As a startup, your accounting systems may still be developing. We will work closely with your team to understand your processes and identify any areas where clarity or adjustments might be beneficial. Your active participation is crucial.
Our fee for this introductory review is estimated at $[Estimated Fee]. We are committed to helping you build a strong financial foundation.
Sincerely,
[Your Name/CPA Firm Name]
Cpa Review Engagement Letter Sample with Emphasis on Fraud Awareness
Dear [Client Name],
This letter confirms our engagement to review the financial statements of [Client Company Name] for the year ended [Date].
While a review does not provide the assurance of an audit regarding the detection of fraud, our procedures will include inquiries designed to identify any potential indicators of fraud. We will ask management about their knowledge of any suspected or actual fraud affecting the entity.
We expect full cooperation and transparency from your personnel. You are responsible for implementing internal controls to prevent and detect fraud, and for the overall accuracy of the financial statements.
Our fee for this review, with the added emphasis on fraud awareness inquiries, is estimated at $[Estimated Fee].
Sincerely,
[Your Name/CPA Firm Name]
Cpa Review Engagement Letter Sample with Specific Industry Considerations
Dear [Client Name],
We are pleased to provide review services for [Client Company Name]'s financial statements for the year ended [Date].
Given your company's operations in the [Industry Name] industry, our review procedures will include specific inquiries and analytical procedures relevant to [mention 1-2 industry-specific items, e.g., inventory valuation methods, revenue recognition for long-term contracts, or regulatory compliance disclosures].
We will perform our review in accordance with AICPA standards, taking into account these industry-specific factors. Your responsibility for the financial statements remains the same.
Our fee for this industry-focused review is estimated at $[Estimated Fee].
Sincerely,
[Your Name/CPA Firm Name]
Cpa Review Engagement Letter Sample for a Non-Profit Organization
Dear [Client Name],
This letter outlines our engagement to review the financial statements of [Non-Profit Organization Name] for the fiscal year ending [Date].
Our review will be conducted in accordance with AICPA standards, with a focus on reporting requirements specific to non-profit organizations. This includes reviewing compliance with [mention relevant regulations, e.g., grant requirements or donor restrictions].
We will perform inquiry and analytical procedures. Your organization's board and management are responsible for the accuracy and completeness of the financial statements and for ensuring compliance with all applicable regulations and funder requirements.
Our fee for this specialized review is estimated at $[Estimated Fee].
Sincerely,
[Your Name/CPA Firm Name]
Cpa Review Engagement Letter Sample for a Specific Reporting Framework
Dear [Client Name],
This letter confirms our agreement for [CPA Firm Name] to review the financial statements of [Client Company Name] for the year ended [Date] prepared in accordance with [Specific Framework, e.g., cash basis of accounting or modified cash basis].
Our review will be conducted in accordance with Statements on Standards for Accounting and Review Services (SSARS) issued by the AICPA. The objective is to provide limited assurance that we are not aware of any material modifications that should be made to the financial statements for them to be in conformity with the [Specific Framework] as described in Note 1.
We will perform inquiry and analytical procedures relevant to this specific framework. Your management is responsible for the preparation and presentation of the financial statements in accordance with the [Specific Framework].
Our fee for this review under the [Specific Framework] is estimated at $[Estimated Fee].
Sincerely,
[Your Name/CPA Firm Name]
Cpa Review Engagement Letter Sample Addressing Potential Scope Limitations
Dear [Client Name],
This letter outlines our engagement to review the financial statements of [Client Company Name] for the year ended [Date].
We anticipate performing our review in accordance with AICPA standards. However, we must note a potential scope limitation regarding [briefly describe the limitation, e.g., the availability of certain historical records or access to specific personnel involved in a past transaction].
If this limitation prevents us from obtaining sufficient appropriate information to perform the necessary inquiry and analytical procedures, we may be unable to issue a review report. We will discuss any such limitations with you promptly.
Our estimated fee for this review, assuming no significant scope limitations arise, is $[Estimated Fee]. We will inform you immediately if circumstances change that may impact this estimate.
Sincerely,
[Your Name/CPA Firm Name]
In conclusion, a well-crafted CPA review engagement letter sample is a cornerstone of professional accounting services. It ensures clarity, manages expectations, and provides a vital framework for the CPA-client relationship. By thoroughly understanding and utilizing these sample letters, both CPAs and their clients can navigate the review process with confidence and efficiency, leading to accurate financial reporting and a stronger professional partnership.