How to Write Letter

Internal Audit Engagement Letter

Before getting into the details of an internal audit engagement letter, let's find out about what in reality an internal audit is? Internal audit is an official examination of the financial or tax records of a company, organization, or person to see that they are accurate. Through an internal audit, a company can rectify the flaw in their system and take appropriate measures thereby eliminating the risk factor involved in the business.

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Internal audit is usually done by accounts personnel within the company. This audit report is then submitted to the external auditor who reviews it for tax return purpose. When the company plans to outsource this audit work, they hold a meeting with the service-providing firm few weeks before the start of an audit. The firm prepares an outline that includes scope and objectives of the audit. After preparation of the outline, an engagement letter is drafted addressing to the highest authority of the company, which describes the process involved in auditing internal financial statements.

Internal Audit Engagement Letter

A&A Associates
201 E Court Streets, #510
Florence, Al 35620-3243
Telephone: (256) XXX-8778
Fax: (256) XXX-7913
Email: a&A@gmail.com

June 30, 2011

To,
Mr. Jason K. Clarke
CEO
ABC Fireworks Ltd.
1250 Brighter Avenue
Florence, AL 35620-3426

Dear Jason Clarke,
With regard to the several meetings we had with your accounts department, I am writing this letter to confirm and lay out our plan in carrying out the intended internal audit for ABC Fireworks Ltd. for the financial year 2010. We appreciate the opportunity offered to us for providing this audit service and all the valuable inputs your staff had provided us in facilitating the audit process. We expect the same kind of cooperation during the process till we finally submit you the audit report.

The purpose of this engagement is to evaluate your internal policies and procedures to help you in achieving your goals and objectives. The audit will deal with the key areas relating to finance, operations and information system issues. The method of an audit process will involve interviews with key personnel from the related department, and inspection of the system that is facilitating accounts maintenance. We are attaching the detailed audit plan along with the contact information of the people that will be working in the project for your reference.

One week before the actual audit starts, we would like to introduce our team to your management personnel. This pre-audit meeting will be held any day and time that is convenient to you. The meeting will definitely help the audit team to provide information of the audit process and the administrative responsibilities. After completing the audit process, an exit meeting will be held to summarize the audit results and to recognize any applicable change to be implemented in your internal system.

We will review your financial system and give you our feedback about any changes to be implemented. For this, we need to have your authorization to our team to access this system. We have planned some automated testing that will give us clear understanding about any flaws in your systems.

If you have any concern before or during the audit process, feel free to contact our audit manager, Mr. Jason D. White at our business number.

Yours truly,
For A&A Associates
Ethan A. Hunt
CPA

Internal audit is necessary for companies to find out flaw, if any, in their accounts-maintaining procedures. As a company, when you are engaging an outside professional firm to perform the internal audit, you can expect a report that will help you to understand the importance of internal control in your financial system. By following the recommendation given in the report, you can minimize the risk and have a standard procedure.

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