NON AUDIT LIMITED COMPANIES (updated June 2009)
1 Responsibilities of accountants
1.1 You have asked us to assist you in the preparation of the financial statements in accordance with the Companies Act 2006. Based on the accounting records maintained by you and the information and explanations given to us by you, we shall compile draft accounts for your approval. We shall then issue signed annual financial statements including our Accountants Report. Unless otherwise agreed in writing we shall plan our work on the basis that no report is required by statute or regulation for the year. In carrying out our engagement we will make enquiries of management and undertake any procedures that we judge appropriate, but are under no obligation to perform procedures that may be required for assurance engagements – such as audits or reviews.
1.2 You have advised us that the company is exempt from an audit of the financial statements. We will not carry out any work to determine whether or not the company is entitled to audit exemption. However, should our work indicate that the company is not entitled to the exemption we will inform you of this.
1.3 Our work will not be an audit of the accounts in accordance with International Standards of Auditing (UK and Ireland). Accordingly, we will not obtain any evidence relating to the validity of the entries in the accounting records, or to the accounts or to the disclosures in the accounts. Nor will we make any assessment of the estimates and judgments made by you in the preparation of the accounts. Consequently our work will not provide any assurance that the accounting records or the accounts are free from material misstatement, whether caused by fraud, or other irregularities or error and cannot be relied on to identify weaknesses in internal controls.
1.4 Since we have not carried out an audit, nor confirmed in any way the accuracy or reasonableness of the accounting records maintained by the company, we are unable to provide any assurance as to whether the financial statements that we prepare from those records present a true and fair view.
1.5 We will advise you on whether your records are adequate for preparation of the financial statements and recommend improvements.
1.6 We have a professional duty to compile financial statements that conform with generally accepted accounting principles from the accounting records and information and explanations given to us. Further, as directors of a limited company, you have a duty to prepare accounts that comply with the Companies Act 2006 and applicable accounting standards. Where we identify that the financial statements do not conform to accepted accounting principles or if the accounting policies adopted are not immediately apparent, this will be made clear in our report, if it is not clear in the financial statements.
1.7 As part of our normal procedures we may request you to provide written confirmation of any information or explanations given to us orally during the course of our work.
1.8 We shall report, with any modifications that we consider may be necessary, that in accordance with this engagement letter and in order to assist you to fulfill your responsibilities, we have complied, without carrying out an audit, the financial statements from the accounting records of the company and from information and explanations supplied to us.
2 Responsibility of directors
2.1 As directors of the company you are responsible for ensuring that the company maintains proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and for preparing financial statements which give a true and fair view and which have been prepared in accordance with the Companies Act 2006 (the Act).
2.2 In preparing the financial statements, you are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and estimates that are reasonable and prudent; and
• Prepare the accounts on the going concern basis unless it is inappropriate to presume that the company will continue in business.
2.3 You are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities
2.4 You are responsible for determining whether, in respect of the year, the company meets the conditions for exemption from an audit set out in section 477 (or 480) of the Act, and for deciding whether the exemption cannot be claimed that year for any of the reasons set out in sections 476, 478 or 479.
2.5 You are responsible for ensuring that the company complies with laws and regulations applicable to its activities, and for establishing arrangements designed to prevent any non-compliance with laws and regulations and to detect any that may occur.
2.6 You have undertaken to make available to us, as and when required, all the company’s accounting records and related financial information, including minutes of management and shareholders’ meetings, necessary to carry out our work. You will make full disclosure to us of all relevant information.
2.7 We also have a professional responsibility not to allow our name to be associated with financial statements which we believe may be misleading. Therefore, although we are not required to search for such matters, should we become aware, for any reason, that the financial statements may be misleading, we will discuss the matter with you with a view to agreeing appropriate adjustments and/or disclosures in the financial statements. In circumstances where adjustments and/or disclosures that we consider appropriate are not made or where we are not provided with appropriate information, and as a result we consider that the financial statements are misleading, we will withdraw from the engagement.