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 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 and conduct a statutory audit 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 part of our work is not an audit .

1.2 Our function as auditors under the Companies Act 1985 is to examine and report on the annual accounts of the company. The directors are responsible for the preparation of accounts giving a true and fair view and for the maintenance of proper accounting records and an appropriate system of internal control. You are also responsible for making available to us , as and when required, all the company’s accounting records and all other relevant records and related information, including minutes of all management and shareholders’ meetings.

1.3 Our legal and professional duty is to make a report to the members stating whether , in our opinion, the financial statements of the company which we have audited give a true and fair view of the state of the company’s affairs , and of the profit or loss for the year, and whether they have been properly prepared in accordance with the Companies Act 1985. In arriving at our opinion we are required by law to consider the following matters , and to report on any in respect of which we are not satisfied :-

(a) Whether proper accounting records have been kept by the company and proper returns adequate for our audit have been received from branches not visited by us;

(b) Whether the company’s balance sheet and profit and loss account are in agreement with the accounting records and returns;

(c) Whether we have obtained all the information and explanations which we think necessary for the purposes of our audit; and

(d) Whether the information in the directors’ report is consistent with that in the financial statements.

1.4 There are certain other matters which, according to the circumstances, may need to be dealt with in our report. For example, where the accounts do not give details of directors’ remuneration or of their transactions with the company, the Companies Act 1985 require us to disclose such matters in our report.

1.5 In addition, we have a professional duty to report if the accounts do not comply in any material respect with Financial Reporting Standards of Accounting Practice, unless in our opinion non compliance is justified in the circumstances. In determining whether such departure is justified we will consider :

(a) whether the departure is required in order for the accounts to give a true and fair view; and

(b) whether adequate disclosure has been made concerning the departure.

1.6 Our professional duties also include :

(a) incorporating in our report a description of the directors’ responsibilities for the accounts, where the financial statements or accompanying information do not include such a description; and

(b) considering whether other information and documentation contained in the accounts is consistent with the audited financial statements.

1.7 Our auditing procedures will be carried out in accordance with the Statements of Auditing Standards issued by the Auditing Practices Board, and will include such tests of transactions and of the existence, ownership and valuation of assets and liabilities as we consider necessary. We will ascertain the accounting systems in place in order to assess their adequacy as a basis for preparing the financial statements. We will need to obtain relevant and reliable evidence sufficient to enable us to draw reasonable conclusions therefrom

1.8 The nature and extent of our tests will vary according to our assessment of the company’s accounting and internal control systems, and may cover any aspect of the business’s operations. We shall report to management any significant weaknesses in, or observations on , the company’s systems that come to our attention of which we believe the directors should be made aware. Any such report may not be provided to any third party without our prior written consent. Such consent will only be granted on the basis that such reports are not prepared with the interests of any party other than the members in mind and that we therefore neither have nor accept any duty or responsibility to any other party as concerns the reports.

1.9 As a part of our normal audit procedures , we may request you to provide formal representations concerning certain information and explanations we receive from you during the course of the audit.

1.10 To enable us to conduct a review of your accounts , which constitutes as part of our audit, we will request sight of any documents or statements which will be issued with the financial statements.

1.11 Once we have we have issued our report we will have no further direct responsibility in relation to the accounts for that financial year. However, we will expect you to inform us of any material event occurring between the date of our report and that of the annual general meeting which may effect the accounts. We are entitled to attend all general meetings of the company , and to receive notice of such meetings.

1.12 We appreciate that the present size of your business may render it uneconomic to create a full system of internal control based on the segregation of duties for different functions within each area of business . In the running of your company we understand that the directors are closely involved with the control of the business’s transactions. In planning and performing our audit work we shall take account of this supervision.

1.13 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.

1.14 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 making available to us , as and when required, all the company’s accounting records, and other relevant records and related information

c) 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.

d) Directors are responsible for ensuring compliance with any accounting requirements of the Charities Acts

Part 3 - Non Compliance by yourself

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.

1.2 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

1.3 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

1.4 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

1.5 If it is necessary to carry out work beyond the responsibilities outlined in this letter , this will involve additional fees.

1.6 Invoices are payable in full before the report is signed and the accounts are made available for filing.

Part 7 – Complaints and queries

If you have any queries in relation to specific matters you should refer to Peter Brown.

Part 8 - Retention of and Access to Records

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 audit 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 audit, 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 auditors, 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 amount to an imposed limitation and 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 auditors, 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 455 Audit charity engagement letter