Are your engagement letters up to date?
The advent of the new accounting standard FRS 102 for financial periods commencing 1 January 2015 has triggered the need to update engagement letters for both audit and audit exempt companies. Some of the issues that the new engagement letters will need to deal with include:
- the Companies Act, 2014
- allocating responsibility for the decision to apply the ‘undue cost or effort’ exemption for any items in the financial statements and the rationale for so doing;
- financial instruments (including the treatment of long term directors’ and inter-company loans);
- investment properties;
- business combinations including goodwill and the recognition and treatment of intangible assets;
- deferred tax and
- defined benefit pension schemes.
For auditors, the engagement letter will need to clearly spell out what types of advice are permitted and which are not allowed e.g. advice on the implementation of current and proposed accounting standards (e.g. FRS 102) is excluded from the definition of ‘accounting services’ in ES5 ‘Non-audit services provided to audited entities’ [1]. However, auditors will need to take care in providing such services, and guard against giving bookkeeping advice and making specific accounting entries, where these go beyond the technical, mechanical or informative nature.
If you would like complete templates of the different entity engagement letters (and indeed representation letters) they are available at €50 plus VAT each. There is a discount for orders of five or more when the charge is five for the price of four.
Among the types of letter available are
- Standard company audit engagement letter;
- MUD Act company limited by guarantee audit engagement letter;
- MUD Act company limited by guarantee audit representation letter;
- Standard company limited by guarantee audit engagement letter;
- Standard company limited by guarantee audit representation letter;
- Standard company audit representation letter;
- Audit exempt company engagement letter;
- Audit exempt company representation letter.
We can also tailor other letters to order. Please send us an e-mail to john@jmcc.ie with the words ‘engagement letter’ in the subject line.
To hear more about the accounting developments in FRS 102 and for online booking on our upcoming FRS 102 course on Tuesday 19 April in the Camden Court Hotel, Dublin 2, please click the following link FRS 102 – The Journal Entries.
