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Reporting
accountants for an incorporated charity |
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It is both recommended good
professional practice and a requirement of the law relating to the provision
of services to set out in writing a clear explanation of the services we
offer. This is known in professional parlance as an ‘engagement letter’. So that any prospective client can
understand the full details of the basis upon which we undertake professional
work, we have placed a sample of our standard engagement letters on this web
site. This particular engagement letter covers the work done by a reporting accountant of an incorporated charity whose turnover is over £90,000 per annum, but below the audit limit for charities. Viewing this web page is subject to our terms and conditions, our honesty scheme (for other professional firms viewing this page), and our copyright.
Clients of the
practice can obtain further information by entering the ‘Client ‘ Zone’ and
searching the index
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A Fee is payable to P Brown & Co for
the downloading of this document by any professional firm of accountants or
solicitors. The fee is payable under our honesty
scheme, whereby this document may be downloaded for £1.00 ( with a minimum
payment of £5.00 in a period of one calender month)
A prospective client may download the document for no charge.
This will be obsolete for accounting
periods commencing on or after April 1st 2008
Note . This is only an example and a specific letter will be sent to each client upon accepting an engagement
It
is both a requirement of the law relating to the provision of services and also
good professional practice to set out clearly in writing the terms and
conditions upon which we provide you with professional services.
This
letter of engagement complies with this requirement. We would request that you
carefully read through this letter to ensure there is no misunderstanding
between us. If you agree to the terms and conditions set out, then please sign and return the spare copy
to us. If there is any point upon which you require clarification, then please
contact us. If, within four weeks, we have not heard from you or received back
the signed copy, we will assume that you are in agreement with the contents of
this letter.
Nothing
in this letter shall relate to any services to be provided to individual
shareholders or directors of the company. Such services shall be the subject of
a separate letter of engagement.
This
engagement letter is governed by and construed
in accordance with English Law. The Courts of England will have exclusive jurisdiction in relation to
any claim,dispute or difference concerning this engagement letter and any
matter arising from it. Each party irrevocably waives any right it may have to object
to any action being brought in those courts, to claim that the action has been
brought in an inappropriate forum , or to claim that those courts do not have
jurisdiction.
Except
as may be otherwise provided by law , any liability to any third party arising
under the Contracts (Rights of Third Parties ) Act 1999 is hereby excluded
Part 1 - Services to be provided
by us.
We
agree to :-
1. Prepare accounts subject to the
following :--
1.1 Your annual financial statements will be
prepared based on the records maintained by you, and on the basis of information supplied by you , and subject to any limitations in
such records or information, will be prepared in accordance with all relevant
Accounting Standards and in accordance with the Companies Act 1985 , and we
further agree to provide advice and assistance on the most appropriate records
for you to keep. In addition, we will prepare the accounts in accordance with
the Statement of Recommended Practice for Charities ( the SORP) as issued by
the Charity Commissioners for England and Wales.
It
is expressly agreed that the accounts preparation is not an audit and is
limited in its scope, as you consider that you are not subject to statutory
audit, and therefore we have no statutory duty to report on the financial
statements.
The
accounts will be prepared in accordance with the statutory provisions with
regard to accountant’s reports on audit exempt charities as set out in section
249 of the Companies Act 1985, and in
the absence of special circumstances our report will be worded as follows :-
“In
our opinion :-
(a)
The financial statements are in agreement with the accounting records kept by
the company under section 221 of the Companies Act 1985 ;
(b)
Having regard only to, and on the basis of, the information contained in those
accounting records :
1)
the financial statements have been drawn up in a manner consistent with the
accounting requirements specified in section 249C(6) of the Act ;
2)
the company satisfied the conditions for exemption from an audit of the
financial statements for the year specified in section 249A(4) of the Act and
did not at any time within that year , fall within any of the categories of
companies not entitled to the exemption specified in section 249B(1) “
1.3 Our work
will not be an audit of the accounts in accordance with Auditing Standards.
Accordingly , we shall not seek any independent evidence to support the entries
in the accounting records, or to prove the existence, ownership or valuation of
assets, or the completeness of income, liabilities or disclosures in the
accounts. We shall not assess the reasonableness of any estimates or judgements
made in the preparation of the accounts. Consequently, our work will not
provide any reasonable assurance that the accounting records are free from
material misstatement, whether caused by fraud, other irregularities or error,
1.4 We have a
professional responsibility not to allow our name to be associated with
accounts which we consider may be misleading. Therefore, although we are not
required to search for such matters, should we become aware, for any reason,
that the accounts may be misleading , and the matter cannot be dealt with by
means of adjustments to the accounts, we shall withdraw from the engagement , and
shall notify you in writing of the reasons.
1.5 As part of
our normal procedures, we may ask you to provide written confirmation of any
information and explanations given by you orally in the course of our work.
2. Dealing with taxation matters
:-
Explanatory note :- Charities
are usually, but not always, exempt from many areas of taxation, but this does
not exempt a charity from many areas of compliance under the taxing
legislation. Hence, it is necessary to cover these areas in this letter of
engagement.
2.1 We will deal with all taxation matters
of a routine nature arising in
connection with the affairs of the company, including preparing and submitting
tax computations to the Inland Revenue.
We will assist you with all matters arising out of the Self Assessment
procedures and to comply with the filing requirements under the Self Assessment
regulations. This is subject to your having supplied us with all information
relevant to your affairs at least one month before the due date for filing any
return, and supplying us with a signed return , after we have prepared the
necessary figures, at least one week before the due date for filing the return.
2.2 It should
be noted that we can only negotiate with the Inland Revenue on the basis of
information supplied by yourself, or third parties acting on your authority.
2.3 This
service excludes any investigation into your affairs by the Inland Revenue, H M
Customs and Excise or the NIC authorities,
and also excludes enquiries , ( except enquiries of a minor or routine
nature) raised upon your return under the formal enquiry provisions which would
be the subject of a separate letter of engagement.
2.4 In
particular, this service includes :-
(i)
preparing and submitting ,subject to your agreement, the Self Assessment
Corporation Tax Return, on the basis of information provided to us by yourself.
(ii) We will, without reference to
yourself, acting as your agents deal with all correspondence, assessments,
payment demands, including lodging, where necessary appeals and claims, and
applications for postponement of payment.
Part 2 – Information to be
supplied by you and agreements by you
For
your part ,you agree :-
1.1 To comply
with any conditions set out in Part 1
1.2 To supply us
with all information in relation to your affairs that we may reasonably
require, or that is relevant to your affairs, promptly and in good order.
1.3 That
notwithstanding our obligation under this letter of engagement to prepare Tax
Returns, Accounts, etc, you ( and you
alone) are responsible for the accuracy and completeness of your accounting
records or other records and that all liabilities, howsoever arising, as a
result of errors, inaccuracies, omissions, commissions or a lack of clarity in
your records, insofar as they attach to us, are excluded, unless it can be
proved that we had specific written notice of the inaccuracy or incompleteness
of your records.
1.4 To follow our advice in relation to the
nature of your bookkeeping, accountancy and other records.
1.5 To fully comply with the Self Assessment
Regulations in all matters including, in particular, the requirement to retain
all your records, personal and business
for a period of (usually) six years after the end of the tax year involved.
More precise details of the requirements are available upon request.
1.6 That nothing in this letter makes us directly or
indirectly responsible for the payment of any taxes. You agree that you remain
fully responsible for the payment of all taxes relating to your affairs. You
also agree that no payment should be made to the Inland Revenue in respect of
Income Tax or NIC, without first having
received written advice from ourselves that the sums demanded are correct. You
also agree that any tax demands should be forwarded to us as soon as possible
for checking, in order to minimise the risk of either interest or penalties.
1.7 That you
will supply us immediately upon receipt by you with copies of any documents or
notices served upon you by the Inland Revenue
1.8 You
acknowledge the responsibilities of Directors, as follows:-
a)
Directors are responsible for ensuring that the company
maintains proper accounting records and for preparing financial statements
which give a true and fair view and which have been prepared in accordance with
the Companies Act 1985 ( The Act)
b)
Directors are responsible for determining whether , in
respect of an accounting period, the company meets the conditions for exemption
from an audit of the accounts as set out in section 249A of the Act, and for
determining whether in respect of the period the exemption is not available for
any of the reasons set out in section 249B
c)
Directors are responsible for making available to us , as and when required, all
the company’s accounting records, and other relevant records and related
information
d)
Directors are responsible for the accuracy and completeness
of the information supplied to us which entails ensuring that internal controls
are adequate and that appropriate accounting policies are selected and applied.
1.1 If at any
time you have not fully complied with our advice in relation to your accounting
records or
1.2 You have not supplied us with the necessary
information to deal with your affairs within any statutory time limits (and the
time limits set out in this letter of engagement shall be of the essence for
the purposes of complying with statutory time limits) or are in breach of any matter in 1.8 of Part 2 above or
1.2
You have in any other way by omission or commission
made it impracticable for us to comply with our obligations under this letter
of engagement,
then, provided that your standing order
payments (if any) are not in arrears, or that any other amounts due to us have
been paid in full, we agree to do whatever we can to assist in rectifying the
situation, but subject to our reserving the right to make a specific charge on
a basis to be agreed before any additional work is undertaken.
1.4 We must
emphasise the severity of the current rules with regard to interest and
penalties that can be applied by the
Inland Revenue , both in relation to late payment of tax and late submission of
returns. The deadlines set out by law are critical - not even one days grace is
allowed. Penalties and interest can also arise where you have supplied us with
incomplete or inaccurate information upon which we have relied in making
estimates of your liabilities in order to agree payments on account with the
Inland Revenue.
Part 4 - Other work
Any
work of whatsoever description not included in this letter of engagement shall
be the subject of a separate agreement ,and this letter shall be taken to be a
full and inclusive statement of the matters referred to.
We
will be pleased at any time to advise you on any business or taxation matters
which you care to refer to us.
Part 5 - Personnel
The
work will normally be undertaken by Peter Brown
Part 6 - Fees
1.1 Our fees are
normally calculated on a time basis , and the charge out rate will reflect the
levels of skills and knowledge involved. We will normally give you an
indication of the likely level of work and hence fees that may be involved with
any area of work before we undertake any particular matter. Bills will be
raised at appropriate intervals during the year and will be payable by you
within 30 days of an account being rendered.
a.
If it becomes necessary for us to withdraw from the
engagement at any time, for any reason, then our fees for time spent up to that
point will be payable whether or not any particular matter has been completed.
b.
In law, we are entitled to retain possession of any books
and records that are your property , in respect of which we have carried out
work, and for which fees are payable, until such time as the fees have been
paid. This is known as an accountant’s lien, and we would reserve our rights to
enforce such a lien.
c.
We reserve the right to prohibit the circulation or
publication of any document we have
prepared on your behalf if either the
fees in respect of that document remain unpaid or if , in the light of
information which has come into our possession subsequent to our completion of
the document , we are of the opinion that we would not have completed that
document had the information been available at the time of completion.
d. If it is
necessary to carry out work beyond the responsibilities outlined in this letter
, this will involve additional fees.
e. Invoices are payable in full before the
report is signed and the accounts are made available for filing.
If
you have any queries in relation to specific matters you should refer to Peter
Brown.
1.1
During the course of our work we will
collect information from you and from others acting on your behalf and will
return any original documents to you following the preparation of your
accounts.
1.2
Whilst certain document may legally belong to you, we intend
to destroy correspondence and other papers that we store which are more than
seven years old , other than documents we consider to be of continuing
significance. If you require retention of any document you must notify us of
that fact in writing.
1.3
If at any time, activities relevant to the report, such as
the maintenance of the company’s accounting records , are outsourced by you to
a service organisation , you undertake to ensure that contracts with the
service organisation provide us, as reporting accountants, with a right of
access to such records at any time, either directly or via the company.
Depending on the circumstances , failure to provide such access could amount to
a breach of the Companies Act 1985 with resultant implications for our report.
Persistent failure could lead to our consequent withdrawal from the engagement.
1.4
As part of our ongoing commitment to providing a quality
service, and also as a part of the statutory regulation of reporting accountants, our files are
periodically subject to an independent quality review. Our reviewers are highly
experienced and professional people , and of course, are bound by the same
rules of confidentiality as this firm.
We
apologise for the length and complexity of this letter ,but there is little
point in skimping an a letter which we hope will be the foundations upon which
a long and mutually rewarding business relationship will be built.
Yours
sincerely
FIRM
NAME
Countersigned
by a director ……………………
Countersignature
dated ……………….
Ref
451 Audit exempt engagement letter
Peter Brown & Co is a trading name of Undershot Ltd,
registered in England , no 4114468. Director :- P.Brown FCCA, FCIE,DchA,BSc.The registered office is Acomb
Grange, Grange Lane, York, YO23 3QZ.
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