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For an
incorporated charity exempt from audit |
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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 an accountant of an incorporated charity whose turnover is below £90,000 per annum. 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.
Note . This is only an example and a specific letter will be sent to each client upon accepting an engagement
Note – this letter may not up to date for legal and
professional requirements and may need to be revised to cover specific
situations
Letter of Engagement
Introduction
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 asn 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.
1.2
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. We will not therefore
make any statement for the public record in connection with these accounts. We
will , however, as your taxation agents, include a report on the accounts when
these are submitted to the Inland Revenue . In the absence of special
circumstances, the report will be addressed to yourselves and be worded as
follows
‘ You consider that the company is exempt from an audit for the
year ended . You have acknowledged
on the Balance Sheet your responsibilities for ensuring that the company keeps
proper accounting records which comply with section 221 of the Companies Act
1985, and for preparing financial statements which give a true and fair view of
the state of affairs of the company and
of its profit or loss for the financial year.
In accordance with your instructions, we have prepared the
financial statements on page to from the accounting records of the company
and on the basis of information and explanations you have given to us.
We have not carried out an audit or any other review, and
consequently we do not express any opinion on these financial statements ‘
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
1.3
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 As
part of our ongoing commitment to providing a quality service, 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
Peter Brown & Co
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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