1a.1 Our function as auditors is to examine the financial statements of the company presented to us by yourselves in your capacity as directors. We have a statutory responsibility to report to the members as a body whether in our opinion the financial statements have been properly prepared in accordance with UK GAAP whether they have been prepared in accordance with the Companies Act 2006 (the Act) and whether they give a true and fair view.
1a.2 Our report will be made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of that Act. Our audit work will be undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for the audit report, or for the opinions we will form. The audit of the financial statements does not relieve you of your responsibilities.
1a.3 In arriving at our opinion, we are required to consider the following matters, and to report on any in respect of which we are not satisfied:
(a) whether the company has kept adequate accounting records and whether branches that we have not visited have sent in returns adequate for our audit;
(b) whether the company’s balance sheet and profit and loss account are in agreement with the accounting records and returns; and
(c) whether we have obtained all the information and explanations which we consider necessary for the purposes of our audit.
We are also required to confirm that the information given in the directors’ report is consistent with the audited financial statements.
1a.4 We have a professional responsibility to report if the financial statements do not comply in any significant respect with applicable accounting standards, unless in our opinion the non-compliance is justified in the circumstances. In determining whether or not this is the case we consider:
(a) whether the non-compliance is required in order for the financial statements to give a true and fair view; and
(b) whether it has been clearly disclosed.
1a.5 Our professional responsibilities also include:
(a) describing in our report the directors’ responsibilities for the financial statements (unless they or the accompanying information already includes such a description); and
(b) considering whether other information in documents containing audited financial statements is consistent with those financial statements.
1a.6 In addition to our report on the financial statements, we expect to provide you with a separate letter concerning any material weaknesses in accounting and internal control systems which come to our notice.
1a.7 In addition, there are certain other matters which, according to the circumstances, may need to be dealt with in our report. For example, where the financial statements do not give certain details of directors’ remuneration as specified by law, the Act requires us to disclose such matters in our report. If the company prepares financial statements in accordance with the small companies regime when, in our opinion, it is not entitled to do so, we are required to state that fact in our report.
1a.8 The name of the Senior Statutory Auditor under Companies Act 2006, s504, is shown on the letter of engagement.
1a.9 In the event that we cease to act as statutory auditors for the company, we are required by paragraph 9(3) of schedule 10 to the Act, to make available, if requested, all relevant information concerning the audit of the company to our successors as statutory auditors. You agree to cover any reasonable costs of making such information available that we may incur in fulfilling our statutory duty.
1a.10 Where it is appropriate to prepare them, if abbreviated accounts are prepared for filing purposes, we will prepare a special auditors’ report in accordance with s449 of the Act.
1a.11 Section 2 sets out the scope of the audit.
1b.1 As auditors we are not responsible for the maintenance of the accounting records of the company nor for the preparation of financial statements which give a true and fair view and which have been prepared in accordance with the Companies Act 2006 (the Act), which duties are imposed on yourselves as directors of the company by the Act.
1b.2 As directors you should not approve the financial statements unless you are satisfied that they give a true and fair view of the assets, liabilities, financial position and profit or loss of the company.
1b.3 When preparing the financial statements, or causing them to be prepared, you are required to:
1b.4 By agreeing to this letter you undertake to make full disclosure to us of all information that may be relevant to the audit.
1b.5.1 You are responsible for:
1b.5.2 You undertake
1b.6 Each director is required to take all steps that he ought to take as a director in order to make himself aware of any relevant audit information and to establish that we are aware of that information.
1b.7 Where audited information is published which includes a report by us, or is otherwise connected to us, on the company’s website or by other electronic means, you must advise us of any intended electronic publication. You must obtain our consent, before it occurs in order for us to ensure that any such publication properly presents the financial information and auditor’s report. We reserve the right to withhold consent to the electronic publication of our report if it or the financial statements are to be published in an inappropriate manner.
1b.8 It is your responsibility to ensure there are controls in place to prevent or detect quickly any changes to electronically published information. We are not required to review such controls or to carry out on-going reviews of the information after it is first published. The maintenance and integrity of electronically published information is your responsibility and we accept no responsibility for changes made to audited information after it is first posted.
2 Scope of audit
2.1.1 Our audit will be conducted in accordance with Audit Regulations issues by the ICAEW (which may be inspected at www.icaew.com/auditnews.) Our work will also be conducted in accordance with International Standards on Auditing (UK & Ireland) and Ethical Standards both issued by the Financial Reporting Council (www.frc.org.uk.). Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements and will include such tests of transactions and of the existence, ownership and valuation of assets and liabilities as we may consider necessary.
2.1.2 The expected form and content of our report will be in line with the most recent bulletin on auditors’ reports published by the Financial Reporting Council. However, the form and content of our report may need to be amended in the light of our findings during the course of our work.
2.2 An audit involves performing procedures to obtain audit evidence regarding the amounts and disclosures in the financial statements. The procedures selected will depend on our judgement, including an assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. We will also evaluate the appropriateness of the accounting policies used, and the reasonableness of accounting estimates made, by management, as well as evaluating the overall presentation of the financial statements.
2.3 When conducting the audit we will consider materiality and its relationship to risk. Materiality is an expression of the relative significance or importance of a particular matter in the context of the financial statements as a whole, or within any of the individual statements making up the whole.
2.4 For each assignment we will use our judgement to assign a monetary value to materiality and we will assess the relative risk in each area of the assignment. The amount of work we perform area by area will be directly influenced by the value we assign to materiality as adjusted by our perception of the risk applicable to that area. Generally, the greater the perceived risk the more work required.
2.5.1 Materiality is not capable of general mathematical definition and the assigned value will be arrived at after considering both the quantitative and qualitative aspects of the financial statements
2.5.2 The nature and extent of our procedures will vary according to our assessment of the company’s accounting system and, the internal control system, and may cover any aspect of the business’s operations that we consider appropriate.
2.5.3 We shall obtain an understanding of the accounting and internal control systems in order to assess their adequacy as a basis for the preparation of the financial statements and to establish whether proper accounting records have been maintained by the company. We shall expect to obtain such appropriate evidence as we consider sufficient to enable us to draw reasonable conclusions therefrom.
2.6 Because of the test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal control system, there is an unavoidable risk that some misstatements, material or otherwise, may remain undiscovered.
2.7 Our audit is not designed to identify all significant weaknesses in the company’s systems and internal controls but, if we detect significant weaknesses we shall report them to you in writing. Any such report may not be provided to third parties without our prior written consent. Such consent will be granted only on the basis that the report is in the company’s sole interests and was not prepared with the interests of anyone other than the company in mind, and that we accept no duty or responsibility to any other party as concerns the reports.
2.8 As part of our normal audit procedures, we may request you to provide written confirmation of certain oral representations which you may have made to us during the course of the audit. In particular, where misstatements in the financial statements that we bring to your attention are not adjusted, we shall require written representations of your reasons. In connection with representations and the supply of information to us generally, we draw your attention to section 501 of the Companies Act 2006 under which it is an offence for anyone to recklessly or knowingly supply information to the auditors that is false or misleading and to fail to promptly provide information requested.
2.9 In order to assist us with the examination of your financial statements, we shall request sight of all documents or statements, including, as appropriate, the chairman’s statement, operating and financial review and the directors’ report, which are due to be issued with the financial statements. We are also entitled to receive details of all written resolutions that are to be circulated to members, to attend all the company’s general meetings and to receive notice of them all.
2.10 As noted above, you are responsible for safeguarding the company’s assets and for preventing and detecting fraud, error and non-compliance with law and regulations. However, we shall plan our audit so that we have a reasonable expectation of detecting significant misstatements in the financial statements or accounting records (including those resulting from such causes), but our examination should not be relied upon to disclose all such material misstatements or frauds, errors or instances of non-compliance as may exist.
2.11 We shall not be treated as having notice, for the purposes of our audit responsibilities, of information provided to members of our firm (principals and staff) other than those engaged on the audit (for example information provided in connection with accounting, taxation and other services).
2.12 Once we have issued our report we have no further direct responsibility in relation to the financial statements for that financial year. However, we expect that you will inform us of any material event occurring between the date of our report and the date the financial statements are sent out in accordance with section 423 Companies Act 2006 which may affect the financial statements.
2.13.1 In order to ensure that there is effective two-way communication between us and to comply with the requirements of International Standards on Auditing (UK & Ireland) we will:
2.13.2 We shall, of course, contact you more frequently and regularly regarding both audit and other matters during the course of our work.